Canada’s economy rebounds in third quarter with 2.6% growth
The Canadian economy topped expectations with a sharp rebound in the third quarter as a stronger trade balance helped fuel the recovery from a tariff-driven contraction.
Statistics Canada said Friday that real gross domestic product rose 2.6% on an annualized basis in the third quarter of 2025. That’s well above expectations from both the Bank of Canada and a poll of economists heading into the release for 0.5% r cent annualized growth.
The Q3 figures also mark a rebound from a contraction of 1.8% in real GDP for the second quarter as U.S. tariffs took hold on the Canadian economy. Those results were revised two tenths of a point lower from earlier StatCan reports.
A better trade balance in the quarter was one of the main reasons behind the growth, the statistics agency said.
Exports edged up 0.2% in the three months from July to September, coming off a steep drop of 7.0% from April to June as U.S. tariffs took full effect. Imports meanwhile fell 2.2% in the segment’s sharpest drop since the fourth quarter of 2022, pushing GDP higher.
Growth in government capital spending also helped fuel growth in the third quarter, the agency said, particularly thanks to an 82% jump in spending on weapon systems from the previous quarter.
The resale housing market was also heating up somewhat in the third quarter of the year, offset by a drop-off in construction.
Dragging on growth last quarter was a decline in household spending — thanks largely to fewer purchases of passenger vehicles — and a slower accumulation in manufacturing inventories.
StatCan cautioned that its third-quarter GDP figures may be subject to larger revisions than usual thanks to the recent U.S. government shutdown. Because the agency relies on U.S. customs information for its merchandise trade inputs, StatCan had to produce a special estimate for its September figures to substitute traditional data sources hampered by the shutdown.
READ: Statistics Canada says retail sales down 0.7% in September at $69.8B
Canada’s stats authority also reported Friday that real GDP rose 0.2% in September, a tick higher than its initial estimates and more than offsetting a drop of 0.1% in August.
The manufacturing industry led growth in September, while the transportation and warehousing sector saw a rebound as travel activity recovered from the Air Canada flight attendants strike the previous month.
But StatCan’s early estimates for October suggest a downbeat start to the fourth quarter.
The agency said it expects real GDP fell 0.3% in the month as results from oil and gas extraction, educational services and manufacturing point to losses. Those preliminary figures will be revised with the formal release of October GDP in December.
The third quarter GDP results come ahead of the Bank of Canada’s last scheduled interest rate decision of the year on Dec. 10.
