Ottawa, Canada – Revised GDP data shows that Canada’s economy contracted by 0.6% in the fourth quarter of 2025, but analysts say the amount of spare capacity in the economy remains limited.

Dominique Lapointe, Director of Macroeconomic Strategy at Manulife Investment Management, noted that Statistics Canada also revised second-quarter data, showing a shallower decline of 0.9% annualized compared with the previously estimated 1.8%. The third quarter was revised to a growth of 2.4%.

“Despite the 4Q drop, the output gap remains largely unchanged — albeit negative — and this does not open the door to additional rate cuts by the Bank of Canada,” Lapointe said.

The data underscores that while Canada experienced a late-year slowdown, the economy’s overall capacity to absorb shocks remains stable, limiting the need for further monetary easing in the near term.