The Canadian economy grew at a slower pace in the third quarter of 2024 and is likely to continue that trend in the fourth quarter, according to the latest Main Street Quarterly report by the Canadian Federation of Independent Business (CFIB), which was released on Thursday.
Key highlights:
- CFIB’s estimates and forecasts in partnership with AppEco suggest Canadian economic growth slowed down to 1.2 per cent in the third quarter of the year. The GDP is expected to continue growing at a slow pace in Q4, at 1.4 per cent, as the economy continues to face some headwinds;
- The Q3 estimate for the total Consumer Price Index (CPI) inflation dropped to 2.1 per cent year-over-year, and according to the Q4 forecast, it is expected to further recede to 2.0 per cent in the last part of this year;
- The Q3 private sector job vacancy rate fell in all provinces and sectors. Nationally, it dropped to 2.7 per cent, a level last seen in mid-2017. This represents 379,000 unfilled positions;
- A special analysis in this edition focuses on struggling and growing businesses. There were nearly twice as many struggling firms in the first three quarters of 2024 (at 5.8 per cent) compared to the 2014-19 average (3.9 per cent). On the other hand, the share of growing firms has almost halved, to 6.0 per cent in 2024 from 10.8% in the pre-pandemic years. Businesses that are doing well are mostly constrained by a lack of labour and space, while struggling firms report a lack of demand and working capital;
- The quarterly sectoral profile focuses on firms in the health and education subsectors. Firms operating in these sectors are more optimistic than those in other sectors, however their confidence is on a downward trend in 2024. These businesses are mostly limited by skilled labour shortages and limited space. Their main cost constraints are occupancy costs and wage costs.
“The good news is that inflation is on the right path and expected to remain within the Bank of Canada’s target range in Q4. This should be a strong motivator for the Bank to make repeated and larger interest rate cuts in the coming months,” said CFIB’s chief economist and vice-president of research Simon Gaudreault.
“Monetary policy is very restrictive at the moment, and we are seeing an important impact on demand, sales and the overall health of a weakened and not-so-optimistic SME sector. Both consumers and firms are impacted by the still-high interest rates. All of this helps to put in context our forecast that Canada’s GDP will continue seeing modest growth in the next quarter.
‘While it is going to take some time for the interest rate cuts to completely work their way through the economy, there’s clearly an imbalance in the economic environment as the higher costs of doing business, already fully being felt and here to stay, continue to make it very difficult for small- and medium-sized firms to operate and grow.”
Meanwhile, the Conference Board of Canada has released its 5-year outlook for the Canadian economy, outlining the key themes that will help or hinder growth in the coming years. Key findings of the research include:
- After falling for much of the past two years, per capita consumer spending will be on a steady path upward over the final three months of the year;
- Businesses have remained cautious in 2024 about investment decisions. But investment is poised to turn the corner soon, spearheaded by the automotive and resource sectors;
- Housing affordability remains top of mind for many Canadians. Recent policy changes targeted at reducing the number of migrants and boosting housing supply will temper housing costs, but the impact may be marginal;
- In terms of U.S. trade and tax policy, our outlook is murkier. Both parties in the upcoming election have the potential to blindside Canada on tax and trade policies;
- Further down the line, Canada’s growth path will be determined by how effectively the economy manages its transition to lower-emission energy sources
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