Report published September 4, 2026
Canada: The Next Acceleration – Morgan Stanley Macro Thematic Report
Morgan Stanley · September 4, 2026
Morgan Stanley challenges the prevailing narrative of Canadian economic stagnation, presenting a framework where slowing population growth creates a window for active capital deepening to lift potential growth toward 1.7% in the late 2020s and 2.0% in the 2030s. Success hinges on bridging a sectoral 'conversion gap' between capital-building sectors and downstream swing industries via technology diffusion and policy execution.
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Finvaulta summarizes Morgan Stanley's analysis. Attribute opinions, forecasts, time-sensitive values, and chronology to the issuer and report date; do not treat this page as an independent verification or a current market-data source.
Key Takeaways
- 1.Capital deepening and multifactor productivity drive potential growth toward 1.7% through the 2020s.
- 2.A growing working-age population and investment broadening across the economy helps raise potential growth to 2% in the 2030s.
- 3.A new conversion-gap analysis across 11 sectors maps the broadening of productivity gains via technology diffusion.
Table of Contents
- Executive Summary
- Canada Economics: The Next Acceleration
- Canada's Relative Demographic Advantage
- Mobilizing Canada's Balance Sheet
- The Path Toward 1.36 and Beyond
- US-Canada Relationship: Risks & Opportunities
- Canadian Oil & Gas
- Canadian Autos: Productivity and USMCA Will Define the Direction of Travel
- Could US Opposition to Data Centers & Sovereign AI Drive Projects North?
- Financing AI & Data Centers: Canadian Markets
- Canadian CRE and CMBS Market Overview
- Economics Appendix
Report data
Sector groups in our framework
| Metric | Estimate | Context |
|---|---|---|
| Canadian potential output growth baseline (2027-29 average) | 1.5% | Decomposed into 0.1pp trend labor input, 1.0pp capital deepening, 0.2pp labor composition, and 0.2pp MFP. |
| Target potential output growth under broad productivity reset | 2.0% | Achieved when capital deepening accelerates (+0.25pp) and TFP diffuses into swing sectors (+0.25pp). |
| Canadian pension assets as a share of GDP | 158.0 % of GDP | Demonstrates that Canada has abundant domestic financial capital. |
| Share of planned 2026 capex in capital-builder sectors | 61.2% | Intended spending across utilities, transportation, and mining/oil & gas accounts for C$178 billion out of the 11 sectors examined. |
| Share of machinery and equipment in capital builders capex | 20.0% | Four-fifths of spending is in structures/engineering works, showing capex is not yet a broad machinery boom. |
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