Canada's economy showed signs of improving through the first half of 2026, but business leaders say long-term growth will depend on reversing years of weak private investment and improving Canada's competitiveness.

A mid-year economic assessment released by the Business Council of Canada says the country has avoided the deeper downturn many economists feared earlier this year, with economic activity strengthening after a slow winter. Recent data showing stronger gross domestic product growth has added to expectations that the economy could continue recovering during the second half of the year.

Despite those encouraging signs, the council argues Canada's biggest economic weakness remains business investment. Capital spending by businesses fell to its lowest level in two years during the first quarter of 2026 as companies delayed major expansion plans amid uncertainty surrounding U.S. trade policy, regulatory requirements and the broader investment climate.

The report suggests there are early indications confidence may be beginning to improve. New commitments to major energy infrastructure projects and investment by large institutional investors point to growing optimism, although the council cautions that the recovery remains in its early stages.

Interest rates and inflation have largely returned to more normal levels after several years of elevated borrowing costs and price pressures. However, the council notes that geopolitical instability, ongoing trade disputes and supply chain disruptions continue to create uncertainty for Canadian businesses. Recent manufacturing data also points to rising input costs linked to higher transportation expenses, energy prices and international trade tensions.

For Alberta and other resource-producing provinces, the outlook may be somewhat brighter than in other parts of the country. Energy investment and resource development continue to attract capital, offering support for employment and economic activity while many other sectors remain cautious. The council identifies resource development as one area with the potential to strengthen Canada's overall economy if investment conditions continue to improve.

The report also highlights Canada's continuing productivity challenge. Business investment has lagged behind many competing economies for several years, contributing to slower productivity growth and limiting gains in wages and living standards. The council argues that encouraging greater private-sector investment will be essential if Canada hopes to improve long-term economic performance.

Overall, the Business Council of Canada concludes the country's economic outlook has improved since the beginning of the year, but warns that stronger growth will depend on restoring business confidence, increasing investment and maintaining stable trade relationships with Canada's major international partners.