New data from Stats Canada show that despite an annual growth rate of 1.7% for the Canadian economy for the total of 2025, the economy shrank by 0.6% in the fourth and final quarter of last year.From the period of October to December 2025, the Canadian economy contracted, bringing the annual growth rate down to 1.7% from 2.4%.Even though the economy is still growing, the annual rate is the lowest since 2020, which was widely impacted by the COVID-19 pandemic."The fourth quarter decrease was due to withdrawals of business inventories following inventory accumulations in the third quarter. Offsetting some of the decline were higher exports, household spending, and government capital investment," the report from Stats Canada reads.The report also highlights the decrease in exports to the United States as a major factor for the slump in fourth quarter GDP numbers."Lower exports, particularly to the United States, were the main contributor to the slower rise in GDP in 2025," the report says..According to Stats Canada, household spending had increased, as well as total capital investment, largely pumped up by increased government investment in the Canadian domestic military industry."Total capital investment rose 0.8% in the fourth quarter, driven by increased government investment in weapons systems," the report says.The report also highlights investments in "engineering structures" as another factor for the boost in capital investment.However, there was a 3.5% decrease in investment in what Stats Canada calls "machinery and equipment."The report also highlighted the trend of government investment in propping up investment numbers and GDP growth, as it says that 2025 "was the third consecutive year in which government capital investment contributed more to GDP growth than business capital expenditures."Projections show that GDP is likely to stagnate into January 2026, but Stats Canada says the projections may be changed.
