Canada recorded a stronger pace of economic growth in the third quarter as higher exports and a sharp pullback in imports lifted real GDP above forecasts. New data from Statistics Canada shows the economy expanded 2.6 percent on an annualized basis from July to September, far above the 0.5 percent growth predicted by the Bank of Canada and private forecasters.
The results mark a clear turnaround from the 1.8 percent annualized decline in the second quarter, when new U.S. tariffs weighed on activity. StatCan revised those earlier figures slightly lower.
A stronger trade position drove much of the rebound. Exports rose 0.2 percent in the quarter after a steep 7.0 percent drop in the spring. Imports fell 2.2 percent, the sharpest quarterly decline since late 2022, which pushed overall GDP higher.
Government spending also supported growth. StatCan reported a large rise in capital outlays, led by an 82 percent surge in spending on weapon systems. The national resale housing market showed moderate improvement as sales activity picked up, offsetting weaker construction levels.
Household spending moved lower in the quarter. Fewer purchases of passenger vehicles were a key factor. Manufacturers also built up inventories at a slower rate, which weighed on overall output.
StatCan noted possible larger-than-usual revisions to the Q3 report. The recent U.S. government shutdown restricted access to customs data, so the agency relied on a special estimate for September trade flows.
The monthly GDP figures showed a small gain in September. Real output rose 0.2 percent, stronger than the initial flash estimate and enough to offset a 0.1 percent dip in August. Manufacturing led the monthly improvement. Transportation and warehousing recovered as travel activity picked up following the Air Canada flight attendants strike in August.
Early data for October points to a weaker start to the fourth quarter. StatCan’s advance estimate signals a 0.3 percent decline in the month, with losses in oil and gas extraction, educational services and manufacturing. Final October results will be released in December.
The latest GDP report arrives ahead of the Bank of Canada’s final interest rate decision of the year on December 10.
