Key Takeaways: Canada’s annualized GDP growth fell to -0.6% in January 2026, reversing from November’s 2.6%. This marks the first contraction since August 2025, with broad-based weakness across sectors. The Bank of Canada’s target remains unmet, and markets responded with a sharp drop in the Canadian dollar.
Canada’s GDP Growth Turns Negative in January: Annualized Rate at -0.6%
Table of Contents
Big-Picture Snapshot
- Drivers this month:
- Manufacturing output: -0.12pp
- Wholesale trade: -0.09pp
- Construction: -0.08pp
- Policy pulse: January’s -0.6% annualized GDP growth is well below the Bank of Canada’s 2% target.
- Market lens: Canadian dollar sold off sharply on release, with bond yields falling as investors recalibrated growth expectations. The negative print surprised markets, which had anticipated a flat reading.
Foundational Indicators
- January 2026: -0.6% annualized GDP growth
- November 2025: 2.6%
- August 2025: -1.6%
- May 2025: 2.2%
- February 2025: 2.6%
- 12-month average (Feb 2025–Jan 2026): 1.04%
- Policy pulse: The Bank of Canada’s inflation-adjusted growth target remains out of reach, with the latest reading marking the second contraction in six months.
- Market lens: Equities retreated on the news, led by cyclical sectors. Investors shifted toward defensive assets, reflecting concerns about the sustainability of Canada’s recovery.
Chart Dynamics
What This Chart Tells Us: The chart highlights a return to contraction after a brief rebound in late 2025. The negative swing in January signals renewed headwinds, with growth momentum failing to stabilize above trend. Directionally, the data suggest a challenging environment for risk assets and policy normalization.
Forward Outlook
- Bullish scenario (20–30%): GDP rebounds to above 1.5% annualized in coming quarters, led by export recovery and easing financial conditions.
- Base case (50–60%): Growth remains subdued, fluctuating between -0.5% and 1.0% through mid-2026 as consumer demand and investment stay soft.
- Bearish scenario (15–25%): Prolonged contraction, with GDP growth below zero for multiple quarters, driven by persistent weakness in housing and business investment.
- Policy pulse: The Bank of Canada faces a difficult trade-off, as growth lags target and inflation risks persist.
- Market lens: Bond markets priced in lower growth expectations, with the yield curve flattening further. Investors are watching for signals on fiscal and monetary support.
Closing Thoughts
- January’s negative GDP growth print marks a setback for Canada’s recovery narrative.
- Historical context: This is the second contraction in six months, following August’s -1.6% reading.
- Upside and downside risks remain finely balanced, with external demand and domestic policy as key swing factors.
- Data source: Statistics Canada, Sigmanomics database. Methodology: Annualized quarter-over-quarter GDP growth, seasonally adjusted.
Key Markets Reacting to Gdp Growth Annualized
Canada’s GDP contraction triggered swift moves across asset classes. The Canadian dollar weakened, while domestic equities and rate-sensitive sectors saw heightened volatility. Below are verified tradable symbols most sensitive to this indicator.
This table shows that negative GDP prints have consistently triggered Canadian dollar weakness versus the US dollar since 2020, while positive readings have supported CAD strength.
- AAPL (US equities): Apple’s Canadian revenue exposure makes it sensitive to CAD swings and Canadian consumer demand shifts.
- USDCAD (Forex): The currency pair reacts directly to Canadian GDP surprises, with CAD weakening on negative growth prints.
- BTCUSD (Crypto): Bitcoin’s correlation with risk sentiment means Canadian macro shocks can drive short-term volatility.
| Period | GDP Growth Annualized | USDCAD Movement |
|---|---|---|
| Feb 2025 | 2.6% | CAD strengthened modestly |
| May 2025 | 2.2% | CAD stable |
| Aug 2025 | -1.6% | CAD weakened sharply |
| Nov 2025 | 2.6% | CAD rebounded |
| Jan 2026 | -0.6% | CAD sold off |
FAQ
Q1: What is Canada’s latest annualized GDP growth rate?A1: Canada’s annualized GDP growth rate for January 2026 was -0.6%, marking a contraction from November’s 2.6%.
Q2: Why did GDP growth turn negative this month?A2: Broad-based declines in manufacturing, wholesale trade, and construction contributed to the negative print, reflecting weaker domestic demand and external headwinds.
Q3: How does this affect the Canadian dollar?A3: The negative GDP surprise led to a sharp selloff in the Canadian dollar, as markets reassessed growth and policy outlooks.
Canada’s economy contracted in January, with GDP growth falling below trend and markets responding swiftly.
Updated 2/27/26
This has been drafted with AI assistance and then thoroughly reviewed, refined, and approved by our human editorial team to ensure accuracy, and originality.
- [1] Statistics Canada, GDP Growth Annualized, January 2026 release.
- [2] Sigmanomics Economic Database, 2025–2026 historical GDP growth data.
January’s -0.6% annualized GDP growth reversed sharply from November’s 2.6%, falling well below the 12-month average of 1.04%. The last negative print was in August 2025 at -1.6%, while both May and February 2025 saw growth above 2%.
Volatility has increased over the past year, with alternating quarters of contraction and expansion. The current reading underscores the fragility of Canada’s economic momentum.