Canadian Economy Rebounds in Q3

The Canadian GDP rose by 0.6% on quarter in the third quarter of 2025, following a revised 0.5% contraction in the previous period. The expansion was driven by a strengthening trade balance, as imports dropped (-2.2%) and exports edged up (+0.2%). Increased capital investment was driven by government capital spending (+2.9%), supported by a substantial 82.0% rise in expenditures on weapon systems. Governments likewise increased investment in non-residential structures, with notable growth in institutional buildings, including hospitals. Meanwhile, business capital investment was largely unchanged. By contrast, both household consumption (-0.1%) and government spending (-0.4%) decreased, while inventory accumulation also slowed. On an annualized basis, the Canadian GDP grew by 2.6%, rebounding sharply from a revised 1.8% decline in Q2 and well above expectations of a 0.5% rise.

The Canadian GDP declined by 0.4% from the previous quarter in the second quarter of 2025, reversing the 0.5% gain from the earlier period. The quarter’s outcome reflected a sharp fall in exports and weaker business investment in machinery and equipment, partially offset by faster inventory accumulation and stronger household spending. Exports of goods and services declined 7.5%, while imports fell 1.3%. In the meantime, business non-farm inventories accumulated at a much faster pace, adding $30.1 billion to GDP. Still, household spending strengthened (1.1% vs 0.1% in Q1), even as corporate incomes and investment softened and federal revenues fell; government expenditures rose 1.8% in the quarter. On an annualized basis, the Canadian GDP contracted by 1.6%, well below expectations of a 0.6% contraction.

The Canadian GDP expanded by 0.5% from the previous quarter in the first three months of 2025, maintaining the revised 0.5% growth rate from the earlier period and ahead of expectations. While the figures were better than those flagged by the BoC, the concentration of growth in net foreign demand and inventory accumulation was supported by firms front-running tariffs from the US instead of core economic strength. The exports of goods and services expanded by 1.6%, while imports rose by a softer 1.1%. In the meantime, business non-farm inventories were accumulated at a sharp pace after withdrawals in the end of last year, adding $8.7 billion to the GDP. Still, economic uncertainty drove household consumption to slow (0.3% vs 1.2% in Q4 2024), while government expenditure contracted for the first time in one year (-0.8% vs 2.3%). On an annualized basis, the Canadian GDP expanded by 2.2%, firmly above expectations of 1.7%.