The Canadian economy expanded by 2.6 percent annually in the third quarter, according to Statistics Canada. This growth helped the country avoid a technical recession, primarily driven by a substantial increase in defense expenditure. Government spending on defense systems surged by 82 percent during this period, contributing to the stronger-than-expected economic expansion, along with a rise in crude oil exports. Additionally, there was an uptick in government investment in non-residential structures like hospitals.
While business investment remained relatively stable, household spending saw a decline as fewer individuals bought cars but increased their expenditures on rent and financial services. The revised data showed a 1.8 percent decline in GDP for the second quarter, compared to the previously reported 1.6 percent drop. However, the third-quarter GDP figures may undergo significant revisions in February due to missing data resulting from the U.S. government shutdown.
Statistics Canada reported a 0.2 percent monthly growth in GDP for September. The positive growth in the third quarter has eased concerns about a potential recession, according to Douglas Porter, the chief economist at Bank of Montreal. Despite the improved economic performance, Porter maintained a growth forecast of 1.4 percent for the next year, slightly higher than the federal budget’s projection of 1.2 percent growth.
The overall economic outlook has prompted the Bank of Canada to remain cautious, with expectations of maintaining the status quo in the upcoming meeting. In contrast, Andrew DiCapua, chief economist at the Canadian Chamber of Commerce, expressed a more pessimistic view, describing the economy as “weak.” DiCapua emphasized the need for stronger domestic demand to boost economic growth, highlighting the current reluctance of households and businesses to accelerate spending and drive the economy forward.
