By MorinvilleNews.com Staff
The Canadian economy is set to experience slow growth through the remainder of 2024, according to the latest Main Street Quarterly report from the Canadian Federation of Independent Business (CFIB). The report highlights economic headwinds that are likely to persist into the fourth quarter, following a modest 1.2% growth in the third quarter.
The CFIB, in collaboration with AppEco, estimates that growth will only slightly increase to 1.4% in the final quarter of the year. Inflation, however, continues to improve, with the Consumer Price Index (CPI) falling to 2.1% year-over-year in the third quarter and projected to further decrease to 2.0% by year-end, aligning with the Bank of Canada’s target range.
In addition to these economic indicators, the report notes that job vacancies have also declined across all provinces and sectors. The national private-sector vacancy rate dropped to 2.7%, the lowest level seen since mid-2017, leaving 379,000 positions unfilled.
A key focus of the report is the increasing number of struggling businesses. Nearly 5.8% of firms faced challenges in the first three quarters of 2024, almost double the pre-pandemic average of 3.9%. Conversely, the number of growing businesses has halved, dropping from 10.8% before the pandemic to just 6.0% in 2024. Businesses that are performing well often cite limited labour and space as key constraints, while struggling firms report declining demand and insufficient working capital.
Sectoral analysis in the report highlights that firms in the health and education subsectors are faring better than those in other industries, but their optimism has waned throughout the year. These businesses, too, are largely impacted by skilled labour shortages and rising costs, including wages and occupancy expenses.
CFIB’s chief economist, Simon Gaudreault, emphasized that while inflation is under control, high interest rates are still suppressing demand and overall business health. “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,” Gaudreault concluded from the report. However, he warned that the restrictive monetary policy continues to weigh on small- and medium-sized enterprises (SMEs), many of which are struggling to cope with the higher costs of doing business.
While interest rate reductions may provide some relief, the report suggests it will take time before these measures positively impact the broader economy. For now, both consumers and businesses will need to navigate the challenges posed by high borrowing costs and a weakened SME sector.
