The Canadian economy expanded by 2.6% annually in the third quarter, according to Statistics Canada’s latest report, preventing a technical recession primarily due to a significant increase in defence expenditure. Government investment in defense equipment surged by 82% during the period, driving the better-than-expected growth, along with a rise in crude oil exports. Earlier commitments made in June by Ottawa and other NATO nations to allocate five percent of GDP to defense by 2035 have also influenced this growth.
Furthermore, there was a rise in government spending on non-residential structures like hospitals. However, business investments remained steady, household spending declined as fewer individuals bought cars, but there was an increase in expenditures on rent and financial services. Statistics Canada revised the GDP figures for the second quarter from a 1.6% contraction to a 1.8% contraction, mentioning a potential significant revision for third-quarter GDP in February due to missing data caused by the U.S. government shutdown.
In September, GDP saw a 0.2% monthly growth, according to Statistics Canada. A technical recession occurs when an economy experiences two consecutive quarters of negative growth, and with the positive third-quarter GDP results, concerns about a recession have diminished. Douglas Porter, the chief economist at the Bank of Montreal, stated that despite the current growth, their outlook for the economy remains at a 1.4% growth rate for the next year, slightly above the federal budget’s expectation of 1.2% growth.
Porter also noted that the Bank of Canada might maintain its current stance due to the better-than-expected economic performance. On the other hand, Andrew DiCapua, the chief economist at the Canadian Chamber of Commerce, expressed a more pessimistic view, describing the economy as “sickly” and highlighting the need for stronger domestic demand to propel growth. DiCapua emphasized that households and businesses are still cautious, hindering the economy from gaining the necessary momentum for acceleration.
