Canada's economy grew by 1.9 per cent in 2025, down from 2.1 per cent in 2024, as household spending and government expenditures supported economic activity while weaker exports and declining business inventories restrained growth, according to Statistics Canada.

The agency's annual gross domestic product (GDP) figures show economic growth across every province and in Yukon and Nunavut, with the Northwest Territories recording the only decline. Newfoundland and Labrador led provincial growth at 4.3 per cent, while Quebec posted the slowest increase at 1.0 per cent.

Household consumption was the largest contributor to economic growth, followed by higher government spending and capital investment. However, international exports declined and businesses continued drawing down non-farm inventories, tempering overall economic performance.

Household spending supports economic growth

Household spending increased 2.0 per cent in 2025, marking its slowest pace of growth since the COVID-19 pandemic-related decline in 2020. Higher expenditures on financial services, particularly investment fees, led the increase, followed by rent, including both paid and imputed rent.

Spending on education declined, reflecting a decrease in the number of international students in Canada. Expenditures abroad also fell as travel by Canadians to the United States slowed.

Prince Edward Island recorded the strongest household spending growth among the provinces at 3.5 per cent, followed by Newfoundland and Labrador at 3.3 per cent. Household spending declined 0.6 per cent in the Northwest Territories.

The price deflator for household consumption expenditure increased 2.5 per cent in 2025, easing from 2.6 per cent in 2024 and 3.7 per cent in 2023.

Government spending drives capital investment

Capital spending increased 1.6 per cent in 2025, compared with a 0.3 per cent increase in the previous year. Government investment in engineering structures and non-residential buildings led the gains, particularly in Prince Edward Island, Nova Scotia and British Columbia.

Business investment in engineering structures also recovered, rising 3.4 per cent after declining in 2024. Newfoundland and Labrador recorded the largest increase, supported by the importation of the West White Rose topside structure. Nunavut and Yukon also posted significant increases, while the Northwest Territories, British Columbia and Manitoba recorded declines.

Investment in machinery and equipment, however, fell for the second consecutive year. Spending on industrial machinery and equipment declined 9.5 per cent, while investment in aircraft and other transportation equipment dropped 15.5 per cent.

One area of growth was computer equipment, with investment in computers and computer peripherals increasing 14.1 per cent. Statistics Canada said this was the largest annual increase since 2011.

Real government final consumption expenditure rose 2.5 per cent in 2025, slowing from 3.8 per cent growth in 2024. The increase was primarily driven by higher intermediate consumption, particularly among local municipalities and provincial and territorial health and social services.

New Brunswick recorded the largest increase in government consumption expenditure at 6.9 per cent, led by provincial general government spending. Quebec, Alberta and British Columbia posted increases below the national rate, while the Northwest Territories and Nunavut recorded declines.

International exports decline as internal trade gains share

International exports decreased 1.1 per cent in 2025, largely because of lower shipments of intermediate metal products, particularly unwrought gold. Exports of building and packaging materials, as well as industrial machinery and equipment, also declined.

Nunavut and the Northwest Territories recorded the largest export declines, reflecting lower shipments of metal ores and diamonds, respectively. Newfoundland and Labrador moved in the opposite direction, with international exports increasing 10.3 per cent on higher crude oil shipments.

International imports declined 0.4 per cent, as purchases of motor vehicles and parts, unwrought gold, and industrial machinery and equipment fell.

Statistics Canada also reported that internal trade, which measures trade between provinces and territories, accounted for a larger share of total trade in 2025. The shift occurred amid global uncertainty and the imposition of tariffs, which contributed to declining international trade, particularly with the United States.

All provinces and territories except Newfoundland and Labrador and Yukon recorded increases in their internal trade shares compared with 2024. Nunavut had the highest internal trade share at 70.8 per cent, while Ontario had the lowest at 27.8 per cent.

Corporate incomes increase as compensation growth slows

Corporate gross operating surplus, a measure of corporate income, increased 3.2 per cent in 2025, compared with growth of 0.3 per cent in 2024. Both financial and non-financial corporate incomes increased, rising 9.7 per cent and 2.7 per cent, respectively.

Nunavut recorded the largest gains in non-financial corporate income, supported by higher gold prices and increased mining profits. The Atlantic provinces also reported strong gains, while Alberta and the Northwest Territories were the only regions where non-financial corporate incomes declined because of weaker mining-related earnings.

Alberta accounted for nearly one-quarter of Canada's non-financial corporate surplus. Ontario represented the largest share at 32.8 per cent, followed by Quebec at 16.9 per cent.

Financial corporate incomes increased in every province and territory, primarily because of higher earnings at chartered banks following no growth in 2024. Ontario accounted for 56.8 per cent of the financial corporate surplus, a share that remained relatively stable over the previous five years.

Employee compensation increased 4.8 per cent nationally in 2025, down from 6.1 per cent growth in 2024. Compensation rose across the country except in the Northwest Territories, where wages declined.

Nunavut recorded the largest increase at 7.9 per cent, driven by wage growth in mining and oil and gas extraction. Nova Scotia followed with a 6.7 per cent increase, led by higher wages in health care and social assistance.

Household savings rate rises as borrowing costs ease

The national household saving rate reached 4.4 per cent in 2025, up from 3.7 per cent in 2024. Statistics Canada attributed the increase to disposable income growing faster than nominal household spending.

Quebec recorded the highest household saving rate among the provinces at 8.6 per cent, followed by Alberta at 8.0 per cent. Ontario's rate was 3.4 per cent, below the national average, although its net household savings increased at a faster-than-average pace compared with the previous year.

British Columbia households were among the lowest net savers, while households in the territories continued to record the highest saving rates nationally. Newfoundland and Labrador and Nova Scotia were the only provinces where households were negative net savers, meaning nominal consumption expenditures exceeded disposable income.

Interest payments on mortgages and non-mortgage loans declined across all jurisdictions in 2025 as interest rates fell. The Bank of Canada lowered its policy rate between June 2024 and October 2025, helping reduce household borrowing costs.

Investment income received by households increased 2.2 per cent in 2025, significantly slower than the 12.7 per cent increase recorded a year earlier.

Despite the decline in borrowing costs, households in Ontario and British Columbia continued to have the country's highest debt service ratios, at 10.4 per cent and 9.7 per cent, respectively. Both provinces also recorded the largest reductions in their debt service ratios compared with other provinces.

Farm inventories rebound while business stocks decline

Record crop production in 2025, particularly for wheat, canola and barley, resulted in significant accumulations of farm inventories. Saskatchewan accounted for nearly half of the increase in farm inventories measured in nominal dollars, followed by Alberta.

Business non-farm inventories moved in the opposite direction, recording their second consecutive annual decline following the record accumulation in 2022. The withdrawals were widespread across durable and non-durable goods manufacturing industries, as well as retail motor vehicles.

The inventory drawdowns, combined with weaker international exports, offset some of the gains from household consumption, government expenditures and capital investment that supported Canada's 1.9 per cent economic growth in 2025.