S&P: Canada set for modest growth, but inflation and weak investment remain hurdles | investingLive

S&P Global said Canada’s economy is poised to expand over the next few years as business conditions begin to improve, even as several structural challenges remain in place.

The ratings agency expects Canada’s unemployment rate to gradually decline in 2026, reflecting a slow recovery in hiring and firmer domestic demand. However, S&P warned that core inflation is likely to stay elevated, suggesting price pressures will remain sticky despite progress in headline inflation.

S&P also flagged weak business investment as an ongoing drag on Canada’s growth outlook. It noted that already-soft investment trends are now being compounded by new U.S. tariffs, which risk further depressing corporate confidence and capital spending.

Overall, S&P said Canada is entering a period of moderate economic expansion but still faces headwinds that could limit the pace and durability of the rebound.