Canada’s gross domestic product (GDP) grew by 2.6 percent on an annualized basis in the third quarter of 2025 due to a decline in imports and a rise in exports, after falling by 1.8 percent in the second quarter.
The growth in GDP during the third quarter far surpassed Statistic Canada’s projection of 0.4 percent annualized growth, the Bank of Canada and a poll of economists’ projection of 0.5 percent annualized growth, and Deloitte Canada’s expectation of 1.2 percent growth.
StatCan said in its Nov. 28 report that the rise in GDP was primarily caused by a “strengthening trade balance,” as as imports dropped and exports edged up. Canada experienced its largest decline in imports since 2022 with imports of goods and services falling by 2.2 percent in the third quarter. Imports of goods like unwrought gold, silver, platinum, as well as industrial machinery, equipment, and parts fell in the third quarter.
Meanwhile, exports increased by 0.2 percent in the third quarter, after a significant drop of 7 percent in the second quarter as U.S. tariffs on Canadian products took effect. The increase in the third quarter was driven by higher exports of crude oil and bitumen, as well as commercial services, StatCan said.
A 2.9 percent growth in government capital spending also fuelled GDP growth in the third quarter, the agency said, as the government increased spending on “weapon systems” by 82 percent from the previous quarter. Governments also spent more on non-residential structures, such as hospitals.
The housing market also experienced increased resale activity due to a 9.1 percent rise in ownership transfer costs after declining 16.2 percent in the first quarter. Residential resale activity grew in all provinces in the third quarter, except for Newfoundland and Labrador, Prince Edward Island, and Manitoba, StatCan said.
Meanwhile, household spending declined by 0.1 percent, due to a 2.3 percent drop in vehicle purchases that was offset by increased spending on rent and financial investment services. Canadians’ spending abroad declined by 3.9 percent as they made fewer trips internationally.
Manufacturing inventories accumulated at a slower pace in the third quarter compared to the second quarter, which dampened the overall GDP growth, StatCan said. The largest slowdowns in inventory accumulation included those in manufacturing, transportation, communication, and utilities.
Employee wages rose 1.1 percent in the third quarter, after increasing 0.3 percent in the previous quarter. Wages increased in all industries in the third quarter, except for in federal government public administration, not including the military.
The highest wages increases were in the areas of professional and personal services, finance, real estate and company management, as well as health care and social assistance. Wages increased in all provinces and territories in the third quarter, with the highest increase in New Brunswick and the lowest increase in British Columbia.
Canada’s household saving rate also increased by 4.7 percent in the third quarter as disposable income “slightly outpaced” nominal household spending, StatCan said. Disposable income mainly increased due to wage increases as well as higher self-employment income and investment income.
Household property income payments, such as mortgage and non-mortgage interest spending, declined 0.6 percent in the third quarter in addition to a reduction in the Bank of Canada’s policy interest rate.
The Bank of Canada announced on Oct. 29 that it had lowered its policy interest rate to 2.25 percent as it said the trade war with the United States had reduced Canada’s economic prospects.
StatCan noted that its GDP figures for the third quarter could be subject to larger revisions than usual due to the recent U.S. government shutdown. Since the agency relies on U.S. customs information for its merchandise trade inputs, StatCan had to produce an estimate for its September figures to substitute data sources that were affected by the shutdown.
The agency also reported that GDP rose by 0.2 percent in September, which it said more than offset August’s decline of 0.1 percent. The increase was driven by goods-producing industries, which increased by 0.6 percent in September, largely due to higher activity in the manufacturing sector, StatCan said.
Meanwhile, the agency is predicting a 0.3 percent decline in GDP to start off the fourth quarter in October, as decreases in oil and gas extraction, educational services, and manufacturing were partially offset by increases in mining, quarrying, and support services. October’s GDP is expected to be formally released on Dec. 23.
StatCan’s third quarter GDP figures come ahead of the Bank of Canada’s last scheduled interest rate decision of 2025 on Dec. 10.
The Canadian Press contributed to this report.
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