CFIB’s Main Street report points to a modest economic upturn, not a big recovery
Canada’s small businesses entered 2026 on slightly firmer footing, with new data pointing to a mild economic rebound that could steady, rather than supercharge, the country’s mortgage market.
The Canadian Federation of Independent Business (CFIB) estimated that real GDP grew 1.6% in the first quarter of 2026. It expects growth to continue at the same pace in the second quarter. Q2 inflation is projected to track at around 2.9%.
Those figures point to positive growth but still below past cycles, broadly in line with the Bank of Canada’s view that expansion would remain modest over the year.
Small firms focus on survival, not expansion
After a year of falling investment in 2025, CFIB’s Main Street Quarterly found that private investment is expected to rebound by 3.1% in the first quarter and 2.9% in the second.
At the same time, investment plans have only “edging back to their historical average,” with owners putting scarce capital into maintenance and productivity rather than big bets.
“While current geopolitical tensions and fuel volatility are putting pressure on consumers and businesses, we forecast the Canadian economy will show a modest recovery for the first half of 2026,” said Simon Gaudreault, CFIB’s chief economist and vice‑president of research.
“This strength stems from strong oil and gas production as well as sustained construction activity.”
However, he warned that operating costs remain elevated, and called for “small business‑friendly policies, such as the temporary pause on the federal fuel taxes,” to ease the burden.
Jobs, rates and housing demand
The report showed the private sector job vacancy rate holding at 2.8%, or about 391,300 unfilled positions, suggesting labour markets remain tight in pockets even as overall growth cools.
“After declining for most of 2025 and closing the year with an overall contraction of 1.7%, small firms’ investment plans are signalling positive but cautious sentiment,” Gaudreault said.
“Most businesses remain focused on maintaining existing operations rather than on major expansion amid higher costs, uncertainty, and continued soft demand.”
Meanwhile, Canada faces a roughly 30% chance of falling into recession, former Bank of Canada governor Stephen Poloz warned, as war-driven energy shocks and trade tensions threatened to tip a fragile economy over the edge. Growth has hovered near 1%, he noted, even before the latest oil price spike.
Deloitte’s spring outlook also shaved its 2026 growth call to 1.2% from 1.5%.
Canadian growth at the start of 2026 turned out stronger than most economists have pencilled in. Statistics Canada’s latest figures showed real GDP edged up 0.1% in January, with an advance estimate pointing to a 0.2% gain in February.
Douglas Porter, chief economist at BMO, called it “a pleasant surprise, for a change,” noting that the economy appeared “in somewhat better shape than anticipated heading into the turmoil.”
In a new research briefing, Oxford Economics said the US–Israel war with Iran would push up prices and uncertainty in the coming months but is “unlikely to derail Canada's economy.”
With housing analysts, including Canada Mortgage and Housing Corporation, seeing a slow recovery in sales and prices beginning in 2026 as trade tensions ease and mortgage rates stabilize, brokers are likely to face an uneven but slowly improving market rather than a V‑shaped rebound.
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