This article originally appeared in the Financial Post. Below is an excerpt from the article.
By Philip Cross, September 12, 2025
Last month’s second-quarter GDP numbers showed that the Canadian economy continues to muddle along, with both real GDP and employment edging up just a per cent in the past year. The Trump-induced decline in exports got the headlines but what’s hampering our economy has more to do with lagging business investment.
Exports have already begun to recover. Most remain duty-free — for now — because they comply with the terms of the CUSMA trade deal. What’s much more menacing is the renewed weakness in Canada’s business investment, even as such investment surges State-side. Business spending on machinery and equipment was down fully 9.4 per cent in the second quarter. Slow growth — or even a reduction — in our capital stock imperils our long-term growth.
In real terms, business investment fell 2.3 per cent in the second quarter, with spending on structures and equipment dipping below $200 billion for the first time since 2021. This continues a decade-long slide, with a drop of 11.7 per cent since the last peak, in 2014.
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Philip Cross is a senior fellow at the Macdonald-Laurier Institute.
