Canadian Economic Growth (Real GDP Q3 2025)

Canadian real GDP rose by 0.2 per cent in September, after declining by 0.1 per cent in August. Goods-producing sectors increased by 0.6 per cent, while service-producing industries grew by 0.1 per cent. Sectoral growth was led by manufacturing (1.6 per cent), wholesale trade (0.6 per cent), and transportation/warehousing (1.2 per cent). The biggest detractor to growth came from retail trade (-0.7 per cent), while construction also contracted by 0.3 per cent. Output for the offices of real-estate agents and brokers fell by 2.3 per cent month-over-month. Preliminary estimates suggest that real GDP by industry decreased by 0.3 per cent in October.
     
Real GDP increased by 0.6 per cent in the third quarter of 2025, registering an annualized growth rate of 2.6 per cent. Growth was driven by a rebalancing of trade, with exports rising by 0.2 per cent and imports falling by 2.2 per cent (largest drop since Q4 2022), respectively. Capital spending from government increased 2.9 per cent, largely driven by military investment. Meanwhile, business investment was mostly flat, as higher spending on residential and engineering structures offset dampened spending on machinery and equipment and non-residential buildings.  Looking deeper, residential investment jumped 1.6 per cent behind recovering resale activity throughout the country, while investment in new construction fell 0.8 per cent. Household final consumption fell 0.1 per cent in the third quarter, while the household savings rate ticked up to 4.7 per cent. On a per capita basis, GDP rose 0.5 per cent in Q3 after falling by 0.5 per cent in the previous quarter. 
     

Canada’s economic performance will surprise many, with annualized growth in the third quarter far outpacing the Bank’s updated projection of 0.5 per cent. Much of this divergence is attributable to a strengthening trade balance, as imports saw their largest quarterly fall in over two years. Importantly, this quarter’s trade data is somewhat incomplete due to the US government shutdown, leaving potential for large revisions moving forward. Moreover, one-time government defense spending propelled growth forward while offsetting continued weakness in private investment. However, frail domestic demand and household consumption continue to demonstrate the fragility of the Canadian economy, which cannot rely on weakening imports or anomalous public spending to drive growth moving forward.  While the Bank of Canada will likely hold its policy rate during its last meeting of the year, a weak preliminary growth estimate for October will catch their concern as global headwinds and underlying weakness in the labour market and broader economy persist.