Canada’s economy falling behind despite misleading headlines

If you’re confused about Canada’s economic performance, you have good reason.

Earlier this year, when Statistics Canada released its first-quarter 2026 economic figures (January to March), much of the conversation focused on the country’s two consecutive quarters of economic decline and that Canada was reportedly in a “technical” recession.

Fast-forward to late August when StatCan released its second-quarter 2026 economic results (April to June), and the story from the Canadian media was much different. Nearly every outlet sang from the same song sheet. “Canada’s economy posts its fastest growth in three years” (Financial Post), “Canada’s economy grew at a strong annualized rate of 3.3% in the second quarter” (CBC News), “Canada’s economy rebounds sharply in second quarter” (The Globe and Mail).

Not to be outdone, Prime Minister Mark Carney jumped in on the action: “This week, Canada’s economy posted its fastest growth in three years—expanding at an annualized rate of 3.3%… Our plan—to build our strength at home and diversify our partnerships abroad—is working.”

First, to clarify, Canada’s economy grew by 0.8 per cent in the second quarter. The media used StatCan’s 3.3 per cent “annualized growth” number—that is, the projected growth rate for the entire year if the economy keeps growing at the same rate it did last quarter. But it hasn’t and it won’t. According to StatCan estimates for July 2026, that month the economy flatlined with no growth.

Then, just a week after releasing its second quarter economic numbers, StatCan released its August job numbers and the media changed its optimistic tune. “Canada’s unemployment rate remains at 6.4% as economy sees broad-based declines. The economy shed 42,000 jobs in August” (Financial Post), “Canada lost 42,000 jobs in August, surprising economists” (CBC News) and “Canada sheds 42,000 jobs in August while U.S. sees burst of hiring” (Globe and Mail).

This time, the prime minister chose not to comment.

Nevertheless, all this hyperfocus on quarters and months distracts from two major long-term economic trends in Canada.

First, average Canadian incomes (measured by per-person GDP) are lower today than three years ago and have essentially stagnated since 2019. Over a longer period, and when comparing Canada with the United States, an even more troubling trend emerges. In 1999, per-person GDP in Canada was $48,076 compared to $58,842 in the U.S., a gap of $10,766. Fast-forward to 2024 and that gap has increased to $23,757, with per-person GDP in the U.S. ($83,286) towering over Canada’s (C$59,529). All figures are adjusted for inflation, in Canadian dollars.

Perhaps even more concerning is Canada’s relatively low level of business investment, the lifeblood of our economy and key driver of middle-class prosperity. Investment means new equipment, innovation, new products and, ultimately, employment for Canadians. Unfortunately, from 2014 to 2024 (the latest year of available data), business investment per worker in Canada declined by 18.8 per cent—from $20,310 to $16,493—yet increased by 31.3 per cent—from $23,263 to $30,555—in the U.S. (again, all figures adjusted for inflation, in Canadian dollars).

While the Carney government has talked a great deal about attracting investment, and, this week in Toronto, the prime minister hosted an investment summit, an elite gathering of foreign investors, the government has maintained policies that discourage investment, entrepreneurship and economic growth.

Canada’s tax system remains uncompetitive, with relatively high tax rates on personal and business income. Our federal government is neck-deep in deficits with mounting debt (which portends the possibility of even higher taxes in the future). We continue to burden investors and businesses with unnecessary and punitive regulations. We have major problems with our transportation system and other key infrastructure including electricity due to rising demand and serious vulnerabilities in our electrical grids.

We can’t fix a decades-long collapse in business investment with an elite investor summit. Capital goes where it’s welcome, and right now, Canada’s uncompetitive taxes, reckless budget deficits and regulatory burden are telling it to look elsewhere. Until Ottawa fixes the investment climate, no temporary quarterly “rebound” will change the fact that Canada is steadily falling behind.