As we recently explored, expanding Canada's productive capacity is no longer just an economic ambition—it is essential for protecting prosperity and leverage in an increasingly competitive world. While we have seen renewed urgency at the federal level to advance major nation-building projects, business investment continues to lag—remaining below levels from early 2023 and the peak level more than ten years prior in late 2014.

There are tentative signs, however, that investment could once again start turning higher. The latest Bank of Canada Business Outlook Survey and Monetary Policy Report indicate a rebound is expected in the second half, though the Bank explicitly noted that national business investment is being "boosted in the near term by the oil and gas sector." The Bank expects investment in sectors outside oil and gas to pick up in 2027 and 2028, as the drag from trade tensions and uncertainty fade. But given recent tariff action by the U.S., those forces may prove much stickier than anticipated.

We don’t have a sector breakdown of the latest quarterly data, but Statistics Canada’s investment survey results released in February provide some clues on where the gains in 2026 are expected to come from. Of Canada’s 20 major industry groups, just nine are driving the entire gain in investment spending this year. Strip out the top four sectors alone, and they account for roughly the entire net gain, as was recently highlighted by the C.D. Howe Institute. The other 11 industries, some of which are acutely tariff-exposed, said they were going to cut back by a combined $5 billion.

Who’s “gaining” and who’s cutting back?

The top four drivers of 2026’s gains are transportation and warehousing; utilities; mining, quarrying, and oil and gas extraction; and public administration. 

Based on the energy price spike from the Iran war and recent progress on advancing pipeline projects, it’s unsurprising that the Bank of Canada notes an improved outlook for investment in the oil and gas sector. 

But if you look closely at that list of industry groups that are growing, the "investment recovery" starts to look uneven. 

Broad-based commercial business investment in Canada is contracting. We see this most acutely in sectors exposed to cross-border trade friction. Manufacturing capital spending is set to decline for a second consecutive year, reflecting ongoing trade uncertainty and tariff pressures. 

Why concentration is a productivity problem

It is tempting to look at positive headline increases and conclude that we’re back on track. 

But to raise long-term living standards, Canada’s economy relies on broad-based capital deepening—putting newer, better tools and technology into the hands of workers across every sector. As C.D. Howe Institute research underscores, widespread investment improvements drive productivity and wage gains.

A handful of sectors carrying the aggregate number doesn’t do that.

Concentration can have different implications

Canada isn’t the only place where capital spending gains look concentrated. Business investment in the U.S. has become heavily skewed toward AI and data-centre-related spending. In Q1 2026, business fixed investment rose over 10% (annualized)—driven almost entirely by information-processing equipment and software, while structures investment actually fell. By some estimates, roughly half of the headline Q1 GDP growth traces back to spending categories where the AI buildout is the dominant source of incremental demand.

The concentration shows up regionally too: Washington state has led all states in growth so far in 2026, powered by its information sector. More broadly across the U.S., states with significant exposure to information and professional services generally outperformed the rest of the country in early 2026. In contrast, states highly dependent on agriculture faced steeper economic headwinds; for example, South Dakota recorded the lowest growth rate in the country, contracting by 1.6% due to declines in agriculture, forestry, fishing, and hunting.

Canada’s investment problem is a symptom of broader, structural weakness. The U.S. version is an investment supercycle so large it’s distorting the composition of an already-growing economy. The question there isn’t “why won’t the rest of the economy invest”—it’s whether the AI buildout is a productive investment that will pay for itself by way of productivity gains, or a massive concentration risk of its own, especially if hyperscaler capex growth decelerates.

Bottom line

To generate the economy-wide productivity gains that drive up real wages and living standards, Canada needs broad-based, private-sector investment. A few heavy sectors carrying the headline number might keep aggregate growth out of the red today, but they won't build the competitive economy we need for tomorrow.

Answer to the previous trivia question: Herbert Hoover signed the Smoot-Hawley Tariff Act into law on June 17, 1930.

Today’s trivia question: What is the northernmost capital of a sovereign state?