A substantial rise in defence-related expenditure was the primary contributor to the stronger result. Government investment in weapons systems surged sharply during the quarter, aligning with Ottawa’s long-term commitment to increase defence spending as part of broader NATO obligations. This boost provided an immediate lift to GDP, complemented by stronger crude oil exports, which benefited from global demand and favourable pricing.
Additional government spending on major non-residential infrastructure, including healthcare facilities, added further support. However, the private sector picture looked considerably more subdued. Business investment remained essentially flat, indicating hesitancy among firms to commit capital amid high financing costs and ongoing uncertainty about the economic outlook. Household spending also weakened, with reduced vehicle purchases offset only partly by increased spending on rent and financial services.
Statistics Canada also revised its second quarter GDP results, confirming a deeper contraction than initially reported. The agency cautioned that the third quarter figures may undergo more significant revisions than usual due to gaps in data stemming from the U.S. government shutdown earlier in the year. For September, monthly GDP rose 0.2 percent, suggesting a modest but positive end to the quarter.
While the third quarter results temporarily quiet the conversation around recession risk, the broader economic narrative remains mixed. Some analysts interpret the latest numbers as evidence that the economy is holding up better than feared, while others point out that the headline figure masks persistent weaknesses in domestic demand. With households and businesses remaining cautious, the economy continues to lack the broad-based momentum needed for a sustained expansion.
For the Bank of Canada, the latest GDP data provides additional reason to maintain a steady policy stance in the near term. The stronger-than-expected growth reduces immediate pressure for rate cuts, though policymakers are likely to continue monitoring labour market softness, business sentiment and household balance sheets.
While the economy avoided slipping into a technical recession, the recovery remains fragile and heavily reliant on government activity. Firms may find opportunities in sectors benefiting from public investment but should continue preparing for an environment in which consumer spending and private investment remain restrained.
Contact Accountancy Insurance
We would love to hear from you.
About Accountancy Insurance
Thousands of accounting firms offer our tax audit insurance solution, Audit Shield to their clients.
Find out why.