The Canadian economy expanded by 2.6 percent on an annualized basis in the third quarter, as reported by Statistics Canada on Friday. This growth helped the nation avoid a technical recession, with a notable boost from increased defense spending. Government investment in weapons systems surged by 82 percent during the quarter, contributing to the stronger growth, along with a rise in crude oil exports. In June, Ottawa committed to allocating five percent of GDP to defense by 2035, aligning with other NATO members.
Additionally, there was an uptick in government spending on non-residential structures like hospitals. However, business investment remained relatively stable, while household spending saw a decline, driven by reduced car purchases but increased expenditures on rent and financial services. Statistics Canada revised the second quarter GDP figures from a 1.6 percent contraction to 1.8 percent, highlighting potential revisions for the third quarter GDP in February due to missing data from the U.S. government shutdown.
In September, GDP saw a monthly growth of 0.2 percent, according to Statistics Canada. The latest results indicate that the economy is not in a technical recession, as two consecutive quarters of negative growth are required for that classification. Douglas Porter, the chief economist at Bank of Montreal, expressed confidence in the economy’s outlook, maintaining a growth projection of 1.4 percent for the next year, slightly above the federal budget’s estimate of 1.2 percent.
Porter noted that the Bank of Canada is likely to maintain its current stance in the upcoming meeting, given the better-than-expected economic performance. In contrast, Andrew DiCapua, chief economist at the Canadian Chamber of Commerce, offered a more pessimistic view, describing the economy as “sickly.” DiCapua emphasized the need for robust domestic demand to drive growth, pointing out the lackluster performance of households and businesses in the third quarter.