Business advocacy group sees glimmers of hope as well as key threats on the horizon
The Canadian economy is projected to grow modestly in the first quarter of 2025, according to the latest Main Street Quarterly report from the Canadian Federation of Independent Business (CFIB). While economic indicators show some resilience, concerns about potential U.S. tariffs are casting a shadow over small business confidence.
CFIB's analysis, conducted in partnership with AppEco, estimates that Canada’s economy expanded by 3.2% in the fourth quarter of 2024 and is expected to moderate to a growth rate of 2.5% in Q1 2025. Encouragingly, inflation appears to be stabilizing, with the Consumer Price Index (CPI) forecasted to hold steady near the Bank of Canada’s 2% target in early 2025.
According to the report, private investment showed signs of recovery in the latter half of 2024, following lackluster performance earlier in the year, as small business confidence improved. However, the job market remains tight, with the private sector job vacancy rate unchanged at 2.7%—equivalent to 378,300 unfilled positions.
The report also highlights growing unease over the potential economic fallout of U.S. tariffs. A survey found that 82% of Canadian businesses that trade with the U.S. expect significant operational impacts if proposed 25% tariffs on Canadian goods are implemented.
“Given the strong trade relationship between Canada and the U.S., such tariffs could drive inflation in Canada, push up prices for consumers, and cause businesses to lose customers,” said Simon Gaudreault, CFIB’s chief economist and vice-president of research.
Sectoral data revealed that businesses in professional, business, and financial services remain more optimistic than the average industry outlook, despite a steady decline in sentiment over the past two years.
While CFIB remains cautiously optimistic about the Canadian economy’s short-term trajectory, Gaudreault emphasized that broader issues, including tax policy uncertainties and the U.S. tariff threat, could weigh on small- and medium-sized businesses. “It’s critical to create an environment where small businesses can thrive and compete, particularly as they face these mounting challenges,” he added.
