Canada’s economy showed a notable rebound in the third quarter, with real GDP rising 0.6 per cent quarter-over-quarter (2.6 per cent annualized), according to Statistics Canada. This improvement followed a sharp 1.8 per cent contraction in Q2, driven largely by U.S. tariffs and trade disruptions. A significantly improved trade balance was the main contributor to Q3 growth: imports fell 2.2 per cent — the steepest decline since 2022 — while exports edged up 0.2 per cent, led by crude oil.
Beneath the headline growth, however, the underlying picture was less encouraging. Household consumption fell, with vehicle purchases marking one of the steepest non-pandemic declines in recent years. Business investment remained flat, and construction activity weakened. Economists caution that the rebound was more statistical than structural, powered by import compression rather than a meaningful recovery in domestic demand. Complicating matters further, the U.S. government shutdown in October meant Statistics Canada did not receive official data on Canadian exports to the United States for the final month of the quarter and had to rely on special estimates.
Early data suggest this momentum may not carry into the fourth quarter. Statistics Canada’s flash estimate for October GDP points to a 0.3 per cent contraction, led by declines in oil and gas extraction, manufacturing, and educational services. Unless November and December deliver a sharp rebound, Q4 growth could undershoot the Bank of Canada’s forecast.
While Bank of Montreal economist Douglas Porter noted that Q3’s upside “quashes recession chatter for now,” he continues to project a modest 1.4 per cent growth forecast for 2026.
The Bank of Canada meets on December 10. Given mixed signals — headline growth offset by weak consumption and a negative October estimate — the central bank is widely expected to keep rates on hold. With inflation risks balanced against slowing demand, policymakers are likely to remain on the sidelines until there is clearer evidence of a sustained recovery.
Housing Affordability Watch
CMI monitors the latest developments and offers insights on solutions to Canada’s housing affordability crisis
Rising construction costs — up nearly 70% since COVID — are reshaping Canada’s housing market and eroding affordability. CMHC points to productivity as the solution, but vague recommendations and recycled initiatives won’t solve the problem. Canadians need concrete, actionable solutions — not another $580M “innovation” fund.
Read more in the latest Housing Affordability Watch: Rising Construction Costs Another Barrier to Affordability
Independent Opinion
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