Canada’s GDP contracted by 0.2% in the fourth quarter of 2025, following a 0.6% increase in the previous quarter. The decline was largely driven by a drawdown of business inventories, even as imports rose by 0.3% and exports increased by 1.5%.
Capital investment was supported primarily by the public sector. Government investment in weapons systems grew strongly, underpinned by a substantial 45.9% year-over-year increase in related expenditures. Governments also continued to boost investment in engineering structures, which contributed positively to GDP growth for a third consecutive year. In contrast, business capital investment slipped by 0.1%.
Household consumption rose by 0.4%, and government capital investment also increased, but these gains were offset by the shift in inventories from accumulation to withdrawal. For 2025 as a whole, Canadian GDP expanded by 1.7%, a slowdown from the previous year and the weakest annual growth rate since 2020.
