The Canadian Federation of Independent Business is forecasting a recession in Canada this year.
A new report from CFIB, released Thursday, shows it’s forecasting that growth declined 0.8 per cent in the second quarter and will contract by a further 0.8 per cent in the third quarter. The report said the contraction is reflective of “persistently low business confidence” stemming from trade tensions and weakness in the manufacturing industry.
Private investment is expected to fall 13 per cent in the second quarter and continue to decline by 6.9 per cent in the third quarter.
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“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 finding alternatives,” CFIB chief economist Simon Gaudreault, said in a press release.
The group says an analysis of the impact of tariffs on supply chains highlights that most firms are anticipating long-term disruptions. It also found that more firms have been impacted by supply chain disruptions since March, particularly in the wholesale and manufacturing sectors.
The report also noted a lack of optimism in the wholesale industry, saying businesses in the space are facing significant challenges and are adjusting pricing strategies in response to trade uncertainty, supply chain disruptions and increasing input costs.
Despite the anticipated downturn, CFIB noted inflation remains stable, putting the Bank of Canada in a better position to consider easing borrowing costs in the second half of the year.
“While we forecast a contraction in the economy, at the same time certain indicators point out that it is normalizing in some ways,” Gaudreault said.
Though, he said the Bank of Canada may decide to hold its key policy rate at 2.75 per cent during its July decision, given inflation and employment figures in June.
Statistics Canada reported annual inflation rose to 1.9 per cent in June, up from 1.7 per cent in May. Core inflation metrics, which are closely watched by the Bank of Canada, remained stubbornly hot around three per cent. Days before the inflation reading, StatCan reported a surprisingly strong jobs gain of 83,000 positions in June.
This report by The Canadian Press was first published July 24, 2025.
