Canadians are cheering news that the economy topped expectations and grew at an annualized 2.6% in this year’s third quarter.
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The growth comes amid a rebound in Canada’s trade balance. While imports into the country declined, exports rose, helping to offset the impact of U.S. tariffs. Statistics Canada reported that real gross domestic product rose 2.6% on an annualized basis in the third quarter. Economists had forecast only 0.5% annualized growth for the country.
The Q3 growth is a sharp reversal from the year’s second quarter, when Canada’s economy contracted at an annualized rate of 1.8% due to the bite of U.S. tariffs. Exports edged up 0.2% between July and September, coming off a steep drop of 7% in Q2. However, imports fell 2.2% in the third quarter, the biggest decline in three years.
Household Spending Shrinks
Dragging on growth in the third quarter was a decline in household spending and a drop in motor vehicle purchases. Canada also saw a slower accumulation of manufacturing inventories. Overall, domestic demand, which encompasses all spending in the economy, was slightly negative during Q3.
Statistics Canada warned that the third-quarter GDP figures could incur a large revision due to the recent U.S. government shutdown. Statistics Canada relies on U.S. customs information for its merchandise trade data, and the collection of that information was hampered by the shutdown in Washington, D.C.
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