The Canadian economy is expected to grow in Q1 2026, according to the latest Main Street Quarterly report by the Canadian Federation of Independent Business/CFIB.
CFIB’s estimates and forecasts in partnership with AppEco, a consulting firm specializing in economic and strategic analysis, suggest the Canadian economy grew by 0.6 percent in the fourth quarter of 2025 and is expected to grow by 3.4 percent in Q1 2026. The Consumer Price Index inflation rose to 2.2 in Q4 2025 and is expected to edge up slightly in the first quarter of 2026.
After posting moderate growth of 0.7 percent in Q4, private investment is expected to recover by 3.5 percent in Q1 which is still very modest for this indicator.
The Q4 2025 private sector job vacancy rate remained unchanged at 2.8 percent, representing 387,600 unfilled positions.
A special analysis this quarter focusing on B2B and B2C businesses found that while all firms have become much less optimistic since Q1 2025, B2C businesses have recovered faster. Weak demand, shortages of skilled labour and distribution constraints affect B2B firms more, while limited physical space is impacting more the B2C firms.
The sectoral profile on business dynamics reveals that business exits have outnumbered entries for more than one year now. Most sectors are seeing more exits than entries, with the ratio being worse in transportation, wholesale, and finance and insurance. Few sectors have ratios consistently positive except these past quarters (e.g. hospitality, professional services), and only the health and education sector is bucking the current negative trend.
CFIB’s chief economist and vice-president of research, Simon Gaudreault concludes that despite a turbulent 2025, Canada’s economy remains relatively resilient. Total inflation is close to Bank of Canada’s target, but inflation dynamics ultimately depend on the ongoing geopolitical tensions and global trade uncertainty. “Private investment declined by 1.2 percent year on year, and it’s encouraging to see it slightly rebounding,” he adds. “Small businesses are adapting to the new trade reality. If uncertainty eases, private investment would recover even further, but we need bold policy changes. That includes reducing taxes and red tape and removing internal trade barriers.”
He further notes that analysis on business dynamics paints a troubling picture. “Canada’s economic pulse depends on a healthy private sector. We can’t keep losing businesses without new ones entering the market. This is a wake-up call for policymakers to create a stronger and more competitive economic environment,” he said.
The CFIB is Canada’s largest association of small and medium-sized businesses with 100,000 members across every industry and region.
Canadian Federation of Independent Business, 401-4141 Yonge St., Toronto, Ontario M2P 2A6 (www.cfib.ca)