Latest report from the independent business body shows slower pace but still positive growth for the end of 2022
Has Canada entered recession and if not, will it do so in the near future?
It’s one of the hottest questions in the country and the latest analysis of the economy by the Canadian Federation of Independent Business (CFIB) suggests the answer remains uncertain.
However, its Main Street Quarterly report does reveal some signs that recession could be avoided, at least for now.
The estimated growth for the last three months of 2022 is 1.2% annualized, followed by early-2023 growth of 0.6%.
"We forecast that the economy has been on a slowdown last quarter and should continue on that path this quarter, without however contracting, which should make a recession avoidable," said Simon Gaudreault, chief economist and VP of research at CFIB.
The report’s inflation forecast is for the Canadian CPI to ease to 5.7% total and 5% when food and energy are excluded.
"While inflation is absolutely not back to normal yet, our analysis suggests it will continue significantly cooling over the current quarter, which should help the Bank of Canada as it decides whether or not to keep raising interest rates," added Gaudreault.
Labour market
Things remain uncertain for the labour market too, with employers still finding it tough to attract talent.
The national private sector job vacancy rate declined slightly in the fourth quarter (4.8%), and 665,500 jobs went unfilled with personal services, construction and hospitality sectors leading the industries where vacancies are highest.
Prince Edward Island and New Brunswick showed the largest quarterly increases, with 6.1% and 5.6% vacancy rates, respectively, while Quebec, BC and Saskatchewan saw slight declines.
Business investment
Fears of recession and rising prices are not a good combination to encourage business investment.
Just under half of SMEs participating in the CFIB research said they are investing with office technology, process machinery or equipment most prevalent.
"This data indicates businesses are willing to invest in technological solutions to help them deal with historically high vacancy rates, but it's hard for them to do so in a state of uncertainty, high inflation and high interest rates. It's crucial for policy makers to show strong support for small businesses and help create the conditions that enable them to hire and invest, so Canada's economy as a whole can grow," Gaudreault concluded.
