Canadian economy projected to grow in Q4 2025 and Q1 2026
The Canadian economy is projected to have grown in Q4 2025, and will see further growth in Q1 2026, according to the latest Main Street Quarterly report from the Canadian Federation of Independent Business (CFIB) and AppEco, an economic consulting firm.
Estimates from CFIB and AppEco pin GDP growth at 0.6% in the fourth quarter. Q3 2025 saw growth of 2.6% after a second quarter contraction of -1.8% amid trade shocks initiated by the US government.
The Main Street report projects growth of 3.4% in the first quarter of 2026.
Meanwhile, consumer price index (CPI) inflation rose to 2.2 in the fourth quarter, and is expected to rise slightly to 2.3 in the first quarter.
“Despite a turbulent 2025, Canada’s economy remains relatively resilient. Total inflation is close to Bank of Canada’s target, but inflation dynamics ultimately depend on the ongoing geopolitical tensions and global trade uncertainty,” said Simon Gaudreault, CFIB’s chief economist and vice-president of research.
In the fourth quarter, the private sector job vacancy rate is estimated to have stayed flat at 2.8%, representing 387,000 unfilled roles.
Private investment saw a -1.2% decline year-over-year in 2025, but is projected to rebound to 3.5% growth in Q1 2026.
“Private investment declined by 1.2% year on year, and it’s encouraging to see it slightly rebounding,” Gaudreault said. “Small businesses are adapting to the new trade reality. If uncertainty eases, private investment would recover even further, but we need bold policy changes.”
The Main Street report found that business exits have outnumbered entries for over 12 months. Most sectors are seeing more exits than entries, with the worst ratios in transportation, wholesale, and finance and insurance.
“Canada’s economic pulse depends on a healthy private sector. We can’t keep losing businesses without new ones entering the market,” Gaudreault said. “This is a wake-up call for policymakers to create a stronger and more competitive economic environment.”
