Canada’s recent technical recession made headlines—but this key indicator has been failing for years

Canada’s recent technical recession may have made headlines, but one of the country’s biggest economic challenges has been building for more than a decade—namely, weak business investment.

Statistics Canada’s first quarter estimate of Canada’s gross domestic product (GDP) revealed that the country had entered a technical recession, commonly defined as two consecutive quarters of declining GDP. And per-person GDP, an indicator of incomes and living standards, has stagnated for years, increasing by only 0.2 per cent from the first quarter of 2022 ($60,247) to the first quarter of 2026 ($60,378) after adjusting for inflation.

While there are multiple reasons for this economic malaise, including trade tensions with the United States, Canada’s steep decline in business investment has played a key role.

Indeed, Marc Desormeaux, economist and vice-president of policy at the Business Council of Canada, recently warned that “business investment continues to be the Achilles’ heel of the Canadian economy.” And Carolyn Rodgers, senior deputy governor of the Bank of Canada, in 2024 described Canada’s sluggish business investment as a national “emergency”. For years economists have warned about this crisis.

In the latest warning, a new study published by the Fraser Institute finds that between 2014 and 2024 (the latest year of available data), business investment per worker—that is, spending on equipment, machinery, factories and new technologies (excluding residential homebuilding)—declined 19 per cent in Canada (from $20,310 to $16,512) but increased by 31 per cent in the U.S. (after adjusting for inflation). As a result, businesses in Canada now invest only 54 cents per worker for every dollar businesses in the U.S. invest, down from 87 cents in 2014.

In 2014, three provinces had higher business investment per worker than the U.S. Alberta had the highest level ($56,401) followed by Newfoundland and Labrador ($53,779) and Saskatchewan ($48,715) while the U.S. invested $23,263 per worker. But in 2024, Saskatchewan was the only Canadian province with higher business investment per worker ($33,386) than the U.S. ($30,555), despite a 31.5 per cent decline over the previous decade. Alberta and Newfoundland and Labrador experienced even steeper declines, with business investment per worker falling by 51.6 per cent and 54.9 per cent, respectively. Ontario and British Columbia recorded more modest gains of 14.3 per cent and 6.4 per cent from 2014 to 2024, yet levels are still roughly half that of the U.S. in 2024.

What does this mean for Canadians?

In short, business investment provides workers with the tools and technologies to produce more and better goods and services, fuelling strong economic growth. And as businesses become more efficient, more productive and ultimately increase profits, they’re able to pay higher wages. Therefore, business investment remains a key driver of incomes and living standards. In other words, the decline in business investment has real implications for Canadian workers—and we’re seeing the consequences in real time through weak economic growth and stagnant living standards.

Canada’s recent technical recession serves as a reminder that the country’s economic challenges extend beyond a few quarters of weak economic growth. If policymakers want to help increase economic growth, worker wages and living standards, they must recognize Canada’s business investment crisis and enact policies—including tax reductions and cutting red tape—to make Canada a more attractive place to invest and do business.