In its latest economic outlook released Thursday, CFIB predicts that the economy shrank by 0.8 per cent in the second quarter of 2025 and is set to contract by the same amount in the third quarter.
The forecast reflects deep-rooted concerns within the business community, particularly related to ongoing trade tensions and struggles in the manufacturing sector. The organisation notes that low business confidence is prompting many firms to pause or cancel investment plans. CFIB projects private investment to drop 13 per cent in the second quarter and fall another 6.9 per cent in the third.
Trade uncertainties and global tariff disputes are forcing Canadian businesses to reassess their supply chains. Many firms expect these disruptions to be long-term and are slowly shifting their operations to mitigate future risks. Since March, the impact of supply chain challenges has intensified, especially for wholesale and manufacturing companies. These sectors are not only facing delays and cost increases, but also a decline in forward-looking optimism.
The wholesale industry, in particular, is under strain. Companies are adjusting pricing strategies to account for uncertainty, increased costs, and unstable access to international goods. CFIB notes that this combination is dragging down confidence and placing further stress on business operations. Many firms are unsure of how to navigate the unpredictability.
Despite this gloomy outlook, there is a silver lining for some businesses. Inflation has remained relatively stable, which could create room for the Bank of Canada to ease interest rates in the coming months. While some economic indicators suggest a contraction, others hint that the economy may be reaching a new form of equilibrium.
It’s uncertain whether the Bank of Canada will act on this. Inflation edged up to 1.9 per cent in June, from 1.7 per cent in May. Core inflation remains persistently high near three per cent, which is a key concern for central bankers. In addition, Statistics Canada recently reported a surprise job surge, with 83,000 positions added in June, further complicating the Bank’s decision-making ahead of its next policy announcement.
As businesses brace for further economic softening, CFIB’s report highlights the urgent need for policy stability and supportive measures to restore business confidence. Until that happens, many small firms are expected to remain cautious, limiting their investments and waiting for clearer signals from both markets and policymakers.
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