Value of machinery and equipment

Private machinery and equipment investment is projected to reach $73.1 billion in 2025, representing a sharp decline of 6.7% from the previous year and marking the steepest contraction since the pandemic recession of 2020. This performance leaves investment 15.0% below the 2008 historical peak of $86.0 billion and remarkably 2.9% below 2005 levels, underscoring the chronic underinvestment that has plagued Canadian businesses for two decades. The current trajectory reflects persistent business caution regarding capital expenditure amid trade policy uncertainty, elevated interest rates despite recent cuts, and structural factors that discourage productivity-enhancing investment in the Canadian business environment.

The past five years witnessed severe volatility in machinery and equipment investment driven by pandemic disruptions, commodity price swings, and monetary policy whiplash. Investment collapsed 15.0% in 2020 to $70.6 billion as COVID-19 lockdowns halted industrial activity and businesses froze capital spending amid unprecedented uncertainty. Recovery proved modest and incomplete, with investment advancing 12.2% in 2021 to $79.2 billion and 4.7% in 2022 to $83.0 billion, reaching levels still 3.7% below pre-pandemic 2019 and 23.5% below the 2008 all-time peak.

This partial recovery proved short-lived as aggressive Bank of Canada interest rate hikes triggered a renewed downturn. Investment declined 2.7% in 2023 to $80.7 billion, fell another 2.9% in 2024 to $78.4 billion, and is projected to plunge 6.7% in 2025 to $73.1 billion. This cumulative 11.8% decline from the 2022 local peak reflects multiple pressures including borrowing costs that remained elevated despite rate cuts beginning in mid-2024, profit margins compressed by cost inflation that reduced cash available for capital spending, and trade policy uncertainty that made businesses unwilling to commit to long-term capacity expansions.