Canadian economy is expected to rebound in the third quarter

By Randy Thanthong-Knight

(Bloomberg) – The Canadian economy appears to avoid a recession with a strong rebound in the third quarter this year.

Industry-based GDP expanded by 0.2% in July, beating economists’ median estimates in the Bloomberg survey, with Statistics Canada pre-status showing output remain unchanged in August. This is the first few months since April, and the economy has not contracted monthly.

Assuming growth in September is zero, the Canadian economy grew at 0.7% annually in the third quarter, which is a strong gain from the contraction in the second quarter.

Economists in the Bloomberg survey predict that the economy will grow slightly 0.2%. However, the Bank of Canada saw a sharp impression of 1% growth, although the forecast could be revised through the October 29 interest rate decision and release monetary policy report. The final expenditure GDP number for the quarter will be released on November 28.

After GDP reports, Loonie reversed the losses and raised the deal at $1.3937 at 8:55 a.m. in Ottawa. Canada’s debt is stable, with two-year yields falling by less than a basis point to 2.49%.

Last week, central banks lowered borrowing costs for the first time in six months to help the economy drag on due to declines in exports and commercial investment. While consumption and housing activity remain healthy, policy makers expect slow population growth, weak labor markets will lead to reduced spending, and economists expect further cuts to gain this year.

At the beginning of the third quarter, the production sector brought in more than expected growth. Metal ore mining rose 2.6% in July, while oil sand extraction increased by 1.2%. Pipeline transport rose 2.8%, the biggest increase since September 2022, as crude oil, asphalt and gas exports also increased.

“Today’s numbers support our view that the Canadian economy is no longer deteriorating. However, Charles St-Arnaud, chief economist at Alberta Central, pointed out in an email that confidence among businesses and consumers still has not rebounded.”

“Whether the economy continues to improve may depend on whether lowering economic activity will translate into further unemployment in the coming months,” St. Arnold added. “Banks of Canada will remain cautious and will lower their policy rates again this year, perhaps October.”

CIBC economist Andrew Grantham said in a report to investors that the upcoming employment and inflation rates are set to determine the tax rate cuts currently forecast by the Canadian Imperial Bank of Commerce, and CIBC economist Andrew Grantham said in a report to investors that more importantly.

Benjamin Reitzes, rate and macro strategist at the Bank of Montreal, said he saw “no urgency” for central banks to lower interest rates.

In July, auto parts manufacturing volume increased by 10.5%, and the motor vehicle manufacturing industry rose by 9.1%, while also consistent with higher exports of these products. Seasonal adjustments have raised these numbers, often seeing temporary closures of Ontario’s auto factories, but the impact of these seasonal closures is less noticeable due to our tariffs due to ongoing slowdowns in production. Auto and parts wholesalers increased by 5.4% in July.

Despite the overall good economy, sectors that rely on U.S. demand have seen the biggest impact of Trump administration tariffs.

The steel industry (more than one-third of production along the border) surged 24.8% between February and July in steel mills and more than one-third of iron and alloy manufacturing. The industry’s monthly activity released by the industry has dropped since the introduction of a 25% steel import tax in early March, with the most activity in July after tariff rates rose in June.

Some overall economic momentum appears to continue in August, with the increase in wholesale trade activity helping to offset the decline in three industrial sectors that generated the growth in July: mining, quarries, oil and gas extraction, manufacturing, transportation, and warehouses. On the other hand, retail trade appears to rebound in August after shrinking 1% in July.

– With the assistance of Mario Baker Ramirez, Carter Johnson and Erik Hertzberg.

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Last modified: September 26, 2025