Canadian economy expected to grow in Q4 2025 and Q1 2026
Economic forecasts based on the most recent monthly Business Barometer® data (December 2025) indicate that GDP grew by 0.6% in the fourth quarter of 2025, following a rebound in Q3. Year-over-year growth slowed to 0.9%. Overall, GDP growth settled at 1.7% in 2025, up from 1.6% in 2024, and remains relatively resilient given persistent geopolitical tensions and global trade uncertainty. Looking ahead, GDP growth is expected to accelerate in the first quarter of 2026 .
Retail sales declined in Q4 2025, with nominal growth of -1.7%, marking the first contraction following several quarters of decelerating growth. On a year-over-year basis, growth fell to 1.0%. This downturn is expected to be temporary, with retail sales rebounding by 4.6% in Q1 2026. Despite a late-year slowdown, nominal retail sales growth averaged 3.8% in 2025, surpassing 2024 and supported by lower inflationary pressures.
CPI inflation rose to 2.2% year-over-year in Q4 2025 and is expected to edge up slightly to 2.3% in Q1 2026. Core inflation, excluding food and energy, remained stable at 2.5% in the fourth quarter, and is expected to fall slightly to 2.3% in early 2026. With total inflation close to the Bank of Canada’s target, these numbers suggest that monetary policy has achieved its objective, although inflation dynamics remain sensitive to external shocks.
Private investment steadied in Q4 2025, posting modest growth of 0.7% while lingering uncertainty continues to weigh on business plans. However, year-over-year, investment declined by 1.2%. Investment is expected to recover more meaningfully in Q1 2026, with growth forecast at 3.5%.
Payroll employment increased by 1.0% in Q4 2025, following modest growth earlier in the year. Year-over-year employment growth reached 0.5%, bringing total employment growth for 2025 to a modest 0.4%. Employment growth is predicted to accelerate to 2.6% in Q1 2026.
These are the recent results from The Main Street Quarterly, CFIB’s economic publication. CFIB and consulting firm AppEco have partnered to develop early short-term economic forecasts of some key macroeconomic indicators, leveraging the timeliness of CFIB’s Your Business Outlook survey, the same survey used to create CFIB’s Monthly Business Barometer®.
The Main Street Quarterly also contains CFIB’s latest estimates of private sector job vacancies and an interactive page. The ‘In Focus’ section, which covers a specific topic each quarter, focuses currently on the B2C versus B2B firms. This edition analyses business entry and exit trends for 2015 to 2025 by sector.
Next release will be around the mid April 2026. For the media release, click here.
Related Documents
Full Report
- Main Street Quarterly Q4 2025
Forecasts
- Forecasts Q4 2025
Job Vacancies
- Interactive page
- Help Wanted Q4 2025
In Focus
- NEW B2C versus B2B firms – optimism and challenges Q4 2025
- The Buy Canadian wave is here Q3 2025
- Tariffs and their growing impact on supply chains Q2 2025
- Impacts of U.S. tariffs on Canadian SMEs' prices Q1 2025
- Challenges faced by exporting and importing firms Q4 2024
- Growing versus declining firms Q3 2024
- Soaring costs of doing business Q2 2024
- Insufficient demand Q1 2024
- Small business price setting plans Q4 2023
- Commercial rents see steep hikes Q3 2023
- Businesses at risk of closing Q2 2023
- Small businesses' wage increase plans Q1 2023
- Investment plans in small firms Q4 2022
- The financial state of small businesses Q3 2022
Sectoral Profile
- NEW Business entry and exit trends, 2015-2025 Q4 2025
- Diverging paths for goods versus services firms Q3 2025
- Wholesale Q2 2025
- Sectoral overview of the impacts of U.S. tariffs Q1 2025
- Financial activities, professional and business services Q4 2024
- Education and health care services Q3 2024
- Personal and miscellaneous services Q2 2024
- Construction Q2 2024
- Transportation Q1 2024
- Manufacturing Q4 2023
- Retail Q3 2023
- Hospitality Q1 2023
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