The Canadian economy is in a "wait-and-see" state, teetering on a fragile edge, according to the Business Council of Canada. Recent economic indicators paint a concerning picture, with Statistics Canada reporting a net loss of 84,000 jobs in February, following a 25,000 job decline in January. This cumulative loss marks the worst start to a year for employment since 2009.
GDP figures released last month indicated that the Canadian economy contracted in the final quarter of 2025, capping off the weakest year for growth since the pandemic. The Bank of Canada has adopted a cautious stance, flagging both downside risks for growth and upside risks for inflation, particularly due to rising energy prices amid geopolitical tensions. Concerns are mounting that the central bank may be limited in its ability to support the economy should inflationary pressures resurface.
Adding to the economic headwinds, Statistics Canada data revealed a population decline of over 100,000 in 2025, the first on record. This decline is attributed to government efforts to reduce immigration, aiming to ease pressure on housing markets and job competition, but it's also creating a drag on overall demand. While some economists anticipate a return to approximately 2% economic growth in the latter half of the year, this relies on the dissipation of current uncertainties.
A significant challenge lies in the stagnation of capital spending by businesses. Flat business investment in 2025 marked the fourth consecutive year of weakness. This prolonged period of underinvestment is attributed to policy uncertainty, complex regulatory and permitting processes, and historical animosity towards the business sector. Addressing this lack of business investment is crucial to boosting productivity and supporting long-term economic growth in Canada.
