Canada will narrowly avoid recession in second half of 2023, says CFIB report

The Canadian economy is forecasted to narrowly avoid a recession in the second half of 2023, according to the most recent Main Street Quarterly report from the Canadian Federation of Independent Business (CFIB) and AppEco, an economic consulting firm.

CFIB is forecasting the Canadian economy to have weak growth of 0.3% in Q3 2023 and rebound slightly to 1.4% in Q4 2023.

Consumer price index (CPI) inflation rose slightly in Q3, from 3.5% to 3.6%. If inflation remains sticky at around 3%, the central bank may hike interest rates one more time in 2023.

The national job vacancy rate continued to trend downward, falling to 4.2% in Q3. The personal services, construction, and hospitality sectors continued to have the highest vacancy rates, though all saw drops in the quarter.

“Small businesses will likely welcome the slight decrease in the job vacancy rate with modest relief,” said Simon Gaudreault, chief economist and VP of research at CFIB. “A lower vacancy rate should help soften the labor market, as employers post fewer vacancies and overall employment grows. There are still close to 600,000 positions vacant in the private sector, way more than in the pre-pandemic period, so we have only gone from an extremely bad to a very bad situation for now.”

A growing share of small and medium-sized enterprises (SMEs) expressed difficulties in occupancy costs, reaching 29% in September. With 64% of SMEs making commercial rent payments, the steady upward pressure on rents since Q4 2021 has driven a large share of the concern on occupancy costs.

A majority of small businesses have seen significant rent increases in the last 12 months, with 12% of SMEs facing rent hikes of 30% or more and 39% of SMEs facing increases of between 6% and 29%. Similar rent pressures have been felt across provinces, sectors, and building types.