Economy rebounds in Q3 2025

GDP reading: Canada's GDP expanded 2.6% on a seasonally adjusted quarter-on-quarter annualized (SAAR) basis in Q3, following a 1.8% contraction in the previous quarter. The Q3 reading was above market expectations and driven by an improvement in net trade, as the hit from U.S. tariffs introduced earlier in the year lessened. However, incomplete U.S. trade data due to the government shutdown increases the likelihood of future revisions to net trade. Meanwhile, domestic demand was sluggish, with declines in private and government spending offsetting higher fixed investment.

Net trade recovers, domestic demand is sluggish: Relative to the prior period's data, readings in Q3 improved for fixed investment (+2.3% on a seasonally adjusted quarter-on-quarter annualized (SAAR) basis vs +0.9% in Q2) and exports of goods and services (+0.7% vs -25.1% in Q2). In contrast, readings softened for private consumption (-0.4% vs +4.2% in Q2), government consumption (-1.7% vs +4.8% in Q2) and imports of goods and services (-8.6% vs -0.4% in Q2).

Weak start to Q4: Preliminary data show that real GDP fell by 0.3% in October, as declines in oil and gas extraction, educational services and manufacturing were partly offset by gains in mining.

Panelist insight: TD Economics’ Andrew Hencic said: “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.”

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