Canadian Quarterly GDP (Q3 2025)

Canada's GDP surges in Q3 as imports tumble

• The Canadian economy topped expectations in the third quarter, rebounding 2.6% (quarter/quarter, annualized) from the second quarter's contraction. The second quarter was also revised lower (-1.8% q/q from -1.6% q/q). Stripping out external factors, final domestic demand came in essentially flat at -0.1% q/q. However, the fourth quarter appears to have gotten off to a rockier start, with the flash estimate for October GDP contracting a steep 0.3% on the month. One thing to keep in mind with today's print – September's trade data were incomplete due to the U.S. government shutdown, adding an additional layer of uncertainty to this report. Statistics Canada had to impute the figure, increasing the likelihood of revisions.
• Consumer spending contracted in the quarter (-0.4% q/q from 4.2% in Q2) as virtually flat services spending (+0.7% q/q) was offset by a contraction in durable goods outlays (-4.6%).
• Residential investment posted another strong figure (+6.7% q/q), as greater resale activity and increases in renovations offset the decline in new construction. Private non-residential investment posted its third consecutive quarterly decline (-4.5% q/q).
• Government investment (+12.2% q/q) increased substantially, with outlays on weapons systems (+82.0% q/q non-annualized) and institutional buildings being noted. 
• Imports declined at their fastest clip since 2022 (-8.6% q/q), while exports were virtually flat (+0.7% q/q). Together, this meant net trade added 3.1 percentage points to overall GDP growth. The import decline came as the one-time impact of the arrival of a large oil and gas platform module in the second quarter fell out of the calculation and flows of unwrought gold, silver and platinum fell. Exports were supported by increased volumes in crude oil and bitumen and commercial services.

Key Implications

• The data were going to be noisy this quarter coming off the trade shock in Q2, so what's important here is to look at the flat performance for domestic demand, and it paints the subdued picture we expected. 
• For the Bank of Canada, the focus will be to look through the noise on trade. The 2.6% advance for the quarter may be well ahead of its 0.5% projection, but the underlying details remain disappointing. The story continues to be – slow domestic demand growth, labour market slack, and inflation that should gradually moderate in the coming months. From where we sit, these three factors should leave the Bank of Canada on the sidelines, and the policy rate at 2.25%.            

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