Canadian economy to contract in the second and third quarters of 2025 Français
Key highlights of the Q2 2025 edition of the Main Street Quarterly report
CFIB's estimates and forecasts in partnership with AppEco suggest Canadian economy fell 0.8% in Q2 and will further contract by 0.8% in Q3. Consumer Price Index (CPI) inflation slowed to 1.8% in the second quarter and is forecasted to rise slightly to 1.9% in Q3.
After contracting in Q1, private investment is estimated to nosedive by 13.0% in Q2 and further drop by 6.9% in Q3.
The national private sector job vacancy rate held steady at 2.8% in Q2 2025. This represents 397,500 unfilled positions.
A special analysis on the impact of tariffs on supply chains highlights that most businesses expect long-term supply disruptions, both abroad and domestically. More firms have been affected by supply chain challenges since March 2025, with wholesale and manufacturing sectors most impacted by Canada-U.S. border delays.
The quarterly sectoral profile reveals that the lack of optimism in the wholesale industry reflects the significant decrease in the number of wholesale businesses with employees and also the steep decline in self-employed over the past decade. They are facing major challenges and are adjusting their pricing strategies in response to supply chain disruptions, rising input costs, and trade uncertainty.
Conclusions by CFIB's chief economist and vice-president of research, Simon Gaudreault:
While we forecast a contraction in the economy, at the same time certain indicators point out that it is normalizing in some ways. Inflation remains stable which puts us in a favourable position to contemplate easier monetary policy for the second half of the year. However, with Canada seeing a 1.9% inflation and unexpectedly adding jobs in June, the Bank of Canada may now decide to maintain its interest rate on July 30.
The "one step forward, one step back" trade situation is driving low business confidence, translating into paused or cancelled investments. As trade tensions drag on, more businesses will be slowly adjusting to tariff threats and findings alternatives.
About AppEco
AppEco is a consulting firm specializing in economic and strategic analysis. It possesses in-depth technical expertise and delivers first-class services in applied economics: economic impact studies, surveys and polls, cost-benefit analyses, modelling, econometrics, pricing, etc. Its mission is to provide useful services that contribute to economic growth and the success of clients' projects. AppEco works with firms of all sizes, from small to multinationals, as well as governments and non-profit organizations. Learn more at appeco.ca/en.
About CFIB
The Canadian Federation of Independent Business (CFIB) is Canada's largest association of small and medium-sized businesses with 100,000 members across every industry and region. CFIB is dedicated to increasing business owners' chances of success by driving policy change at all levels of government, providing expert advice and tools, and negotiating exclusive savings. Learn more at cfib.ca.
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