Canada’s Economy Rebounds in Q3 With 2.6% Annualized Growth

Canada’s economy returned to growth in the third quarter, expanding at a stronger-than-expected 2.6% annualized pace, driven by a sharp improvement in the trade balance and an uptick in government capital spending, according to data released Friday by Statistics Canada.

On a quarterly basis, real GDP grew 0.6% between July and September, reversing the 0.5% contraction recorded in Q2 (revised from -1.6%). The rebound was largely powered by a combination of rising exports (+0.2%), a 2.2% drop in imports, and a 2.9% increase in government capital investment. Business investment, however, was flat.

Monthly data showed the economy grew 0.2% in September, in line with analyst expectations. But momentum may be fading: Statistics Canada’s early estimate suggests GDP likely contracted 0.3% in October, hinting at renewed weakness as the fourth quarter begins.

Analysts surveyed by Reuters had expected just 0.5% annualized growth for Q3, making today’s report a meaningful upside surprise.