Canadian Business Exits Outpace Entries, Signaling Structural Weakness
Event summary
- CFIB, in partnership with AppEco, forecasts Canadian economic growth of 0.6% in Q4 2025 and 3.4% in Q1 2026.
- CPI inflation is expected to slightly increase from 2.2% in Q4 2025 to 2.3% in Q1 2026.
- Private investment is projected to rebound by 3.5% in Q1 2026, following a 1.2% year-on-year decline.
- A persistent job vacancy rate of 2.8% (387,600 unfilled positions) remains unchanged.
- Business exits have exceeded entries for over a year, particularly impacting transportation, wholesale, and finance sectors.
The big picture
The Canadian economy is demonstrating resilience despite recent turbulence, but the persistent imbalance between business exits and entries points to underlying structural challenges. While short-term growth is anticipated, the lack of new business creation and the reliance on external factors like easing geopolitical tensions pose significant risks to sustained economic health. The report underscores the need for policy adjustments to foster a more competitive environment and encourage private investment.
What we're watching
- Policy Response
- The CFIB's call for reduced taxes and trade barriers highlights the potential for government intervention to stimulate private investment, but the effectiveness of such measures remains uncertain given ongoing geopolitical risks.
- Sectoral Divergence
- The contrasting performance of sectors like hospitality and health/education versus transportation and wholesale suggests a structural shift in the Canadian economy that warrants further investigation into underlying drivers.
- Investment Sustainability
- The modest rebound in private investment may prove unsustainable if geopolitical tensions persist and broader economic uncertainty fails to abate, potentially hindering long-term growth prospects.
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