Canadian economy to see slow growth in the third and fourth quarter of 2025
Economic forecasts based on the most recent monthly Business Barometer® data (October) indicate that GDP grew by 0.8% in the third quarter of 2025, and that the last quarter should be virtually flat. This places 2025 growth at 1.2% for the year, a slowdown compared to 2024, but resilient given the cocktail of commercial tensions observed.
Retail sales were slightly stronger than anticipated in the third quarter with nominal growth of 2.1%. The trend is expected to maintain in the fourth quarter, with growth forecast at 2.9%. For 2025, nominal retail sales progressed more than the previous year, despite declining inflation.
CPI inflation rose to 2.0% in the third quarter and is expected to remain stable for the rest of the year. Excluding food and energy, inflation hovers around 2.5% with no clear trend. With total inflation at the Bank of Canada's target rate, one can say that the central bank's strategy worked out, even though significant uncertainty remains going forward.
Private investment declined by 2.4% in the second quarter of 2025, and ongoing uncertainty continues to weigh on business plans. Estimates point to a 3.7% decline in the third quarter and a further contraction of 4.5% in the fourth quarter. This slowdown reflects a sharp decline in investment spending amid deteriorating business confidence, particularly in goods-producing sectors affected by global trade instability and input price volatility. Overall, 2025 saw a contraction of investments of 1%, following a decline of 1.4% in 2024.
Payroll employment fell by 0.1% in the second quarter, but this is expected to reverse in the third quarter with growth of 0.7%. Employment growth is then expected to keep track with GDP at 0.2% in the fourth quarter. This places yearly growth at 0.4%, a very weak reading.
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 an interactive page. The ‘In Focus’ section, which covers a specific topic each quarter, focuses currently on the Buy Canadian wave. This edition shows a deeper sectoral analysis of the goods versus services firms.
Next release will be around the end of January 2026. For the media release, click here.