CANADA DATA: Surprise Q3 GDP Jump On Weak Imports, But Upward Revisions As Well

Real GDP growth was much stronger than expected in Q3 as imports fell heavily in continued heightened volatility within trade data. Final domestic demand meanwhile was flat on the quarter after a strong Q2. For a better idea of recent trends, real GDP growth eased two tenths to 1.4% Y/Y after some solid upward revisions whilst domestic demand is a little stronger at 1.7% Y/Y. The BoC last month forecast real GDP growth of 0.5% Y/Y in 4Q25 before 1.6% in both 4Q26 and 4Q27, whilst it estimates potential output growth of 1.6% in 2025, 1.0% in 2026 and 1.3% in 2027.

• As noted at the time, real GDP growth was far stronger than expected in Q3, rising 2.6% annualized vs the BoC forecast of 0.5%.
• There were some wide-ranging revisions to 2022-24, with the Q3 bounce following a larger than first thought decline of -1.8% (initial -1.6) in Q2 but also sizeable upward revisions to prior quarters.
• It left the Y/Y at 1.4% in Q3 after the 1.6% in Q2 was revised up from 1.2%.
• To clarify the confusion from some at the time of the release: Bloomberg shows the annualized print (2.6%) whereas StatCan reports non-annualized (0.6%, 0.645 to be precise).
• However, much of the Q3 strength was driven by a slump in imports (-8.6% annualized) on continued large trade distortions. This time, imports fell after Q2 saw a “significant” increase in “unwrought gold, silver and platinum group metals” along with a base effect from Q2’s import “of a large oil and gas platform module.”
• As cautioned beforehand, trade data are particularly susceptible to revisions, not least because a lack of US data for September, and indeed there was a large revision to Q2 imports (seen at -0.4% annualized vs the -5.1% initially reported). Indeed, “exceptionally this quarter, special estimates on Canadian international merchandise exports to the United States for the reference month of September were produced to compile third quarter statistics.”
• Ultimately, net trade added 3.1pps to real GDP growth on a crude annualized basis after a huge drag of 8.4pps in Q2 when exports slumped -25% annualized in US tariff fallout.
• Final domestic demand meanwhile was subdued at -0.1% annualized after 3.5% in Q2. It has swung from quarter to quarter recently, oscillating between roughly 4% and -0.5% in the past four quarters, but the moderation from 2.5% to 1.7% Y/Y for its softest since 2Q24 tells a clearer story. It tracks above the aforementioned 1.4% Y/Y for real GDP growth in Q3.