grew at an annual rate of 2.6 percent in the third quarter, significantly exceeding expectations
and economists.
Forecasters predicted
will increase by a much more modest 0.5 percent. This performance was driven by a strengthening of Canada's trade balance, with imports falling and exports increasing during the quarter.
Statistics Canada reported the news on Friday.
This was also supported by increased capital spending by governments, while business investment remained stagnant.
Friday's data means that after contracting in the second quarter, the Canadian economy has successfully avoided a recession, which is defined as two consecutive quarters of negative GDP growth.
However, an early estimate for October suggests momentum may have faded by the final quarter of the year, with activity down 0.3 percent for the month.
Imports of goods and services fell 2.2 percent during the quarter, while exports rose 0.2 percent after a significant decline of seven percent in the second quarter.
In addition to the improved trade balance, government capital spending rose 2.9 percent, driven by a significant increase in spending on weapons systems. Residential property investment also increased in the third quarter, driven by increased resale activity. However, the construction sector continued to struggle, with new construction down 0.8 percent.
The quarterly growth was also driven by higher export prices for energy projects and a recovery in corporate earnings, which increased 2.5 percent due to higher earnings from the energy, mining and manufacturing sectors.
Household spending fell 0.1 percent during the quarter, driven by lower spending on passenger vehicles but offset by higher spending on rentals and financial investment services. Household savings rates rose as disposable income slightly exceeded nominal household spending.
There was also a decline in inventories in manufacturing, transport, communications and utilities.
Monthly GDP increased 0.2 percent in September, offsetting a decline in August. The manufacturing sector led the growth, followed by transport and warehousing, wholesale trade, and mining.
Statistics Canada on Friday also revised down its second-quarter GDP figures, saying the economy grew 1.8%, down from a previously reported 1.6%.
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