Economists are warning that the Canadian economy is struggling to gain traction despite third-quarter growth that barrelled past estimates.

Gross domestic product (GDP) for the third quarter came in at 2.6 per cent annualized compared with estimates for 0.5 per cent growth, but some economists say the details of the report paint a less-than-favourable picture of the Canadian economy.

The agency’s flash estimate for October suggests GDP growth shrank 0.3 per cent, reversing a monthly gain of 0.2 per cent in September.

Some economists think that means the economy could shrink in the fourth quarter, falling short of the

Bank of Canada’s growth estimate of one per cent annualized. Here’s what economists had to say about the GDP data and what it means for the Bank of Canada.

‘Flattered’: Oxford Economics

“GDP growth surprised to the upside in (the third quarter), but headline growth was flattered by a large drop in imports, which masked underlying weakness in domestic demand as households and businesses spent less,” Tony Stillo, head of Canada Economics at

Oxford Economics Ltd. , and senior economist Michael Davenport said in a note. Imports of goods and services had their largest decline since the fourth quarter of 2022, falling 2.2 per cent in the third quarter, while exports inched up 0.2 per cent compared to a drop of seven per cent in the second quarter.

Stillo and Davenport said exports failed to meaningfully rebound and that the GDP beat is more a result of a “mathematical boost” than a sign of strength.

“We still think the Canadian economy is in a fragile position and expect it will struggle to grow in the near term amid U.S. tariffs, elevated trade policy uncertainty, and much slower population growth,” they said.

‘Running on fumes’: Desjardins

“Growth roared back far stronger than anyone expected in (the third quarter), but dig deeper and the engine still looks like it’s running on fumes,” Royce Mendes, head of macro strategy at

Desjardins Group , said in a note. He said final domestic demand — the total for all spending in Canada — was “weaker than expected” after the measure came in flat for the quarter.

Household spending also looked “soft,” he said, falling 0.1 per cent amid signs of consumer caution as the savings rate rose slightly to 4.7 per cent.

And the flash estimate for October portends ill for the final quarter, setting the stage for possible contraction, he said, adding that it appears the economy has lost any “momentum.”

Mendes expects the Bank of Canada to hold rates at its Dec. 10 meeting, but “the economy is still clearly in a fragile state” and central bankers will “need to remain on high alert early next year.”

‘Weak’: Continuum Economics

“Weakness in imports does not imply economic strength in Canada,” Dave Sloan, a senior economist at Continuum Economics (4Cast Ltd.), said in a note.

He also said there are questions about the September figures because United States trade data for the month was not available due to the federal government shutdown down south.

There were some brighter spots, he said, as GDP figures for July and August were revised up, but the flash estimate for October is “weak.”

If it comes in as forecast, and if November and December are flat, fourth-quarter GDP could contract 0.8 per cent annualized, he said.

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