Canadian economy to see stagnant growth in Q1 2025 and an important contraction in Q2 2025
Economic forecasts based on the most recent monthly Business Barometer® data indicate that GDP growth fell to 0.8% in 2025 Q1 and that an important contraction is to be expected in Q2. This decline comes from a historically low long-term business sentiment in the context of the raging trade war.
Retail sales surpassed expectations in 2024 Q4, growing by 10.6% in nominal terms. While sales maintained some of their strength in Q1, they are expected to contract by 2.3% in 2025 Q2.
After continuous decreases in 2024, CPI inflation picked up to 2.4% in 2025 Q1 and should continue its upsurge to 2.7% in Q2, fueled by the termination of the GST/HST tax break and the tariffs turmoil. It remains to be seen whether the Bank of Canada decides to look through this uptick or to act by raising rates.
Private investment grew by an exceptional 10.7% at the end of 2024, but current uncertainty is weighing on investment plans, driving the estimate for 2025 Q1 at -13.9% and the forecast for Q2 at -19.1%. Given the low business confidence over the next 12 months, this freeze in capital expenditures is not surprising.
Payroll employment growth came in as expected in 2024 Q4 with a flat reading. Employment increased slightly at the beginning of the year (+0.7%) but is projected to fall by 3.8% in Q2, in line with the overall economic contraction.
Those 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 a NEW interactive page. The ‘In Focus’ section, which covers a specific topic each quarter, focuses currently on the impacts of U.S. tariffs on Canadian SMEs' prices. This edition shows a deeper sectoral analysis of the impacts of U.S. tariffs on price setting plans.
Next release will be mid July 2025.