Canada managed to dodge a technical recession in the third quarter, with the economy growing at an annualized rate of 2.6%, according to new data from Statistics Canada. But the story behind that growth is more complicated than the headline suggests.

The main driver wasn’t consumer spending or booming business investment — it was government defence spending, which surged by a massive 82%, largely due to increased investment in weapons systems. This comes as Canada and other NATO countries committed to raising defence spending to 5% of GDP by 2035.

There was also a boost from crude oil exports and more government spending on large infrastructure projects like hospitals. That helped offset weakness elsewhere in the economy.

On the flip side, household spending slipped, with fewer people buying cars, and business investment barely moved. People did spend more on financial services and some everyday services, but overall demand remains soft.

Statistics Canada also revised the previous quarter, showing the economy actually shrank 1.8% in Q2 instead of the initially reported 1.6%. And there’s a chance Q3 numbers could be revised again due to missing data tied to a U.S. government shutdown.

Economists are split on what this all means. Some say the stronger-than-expected growth should calm recession fears for now. Others argue the economy still looks fragile, with households and businesses holding back and lacking real momentum.

Bottom line? Canada avoided a recession for now — but the recovery is looking uneven and heavily reliant on government spending rather than private-sector strength.