OTTAWA – The Canadian economy is expected to contract through the middle of 2025, according to the latest Main Street Quarterly report from the Canadian Federation of Independent Business (CFIB).
The report, produced in partnership with AppEco, indicates that the economy shrank by 0.8% in the second quarter of 2025 and is forecast to decline by another 0.8% in the third quarter. During the same period, the Consumer Price Index (CPI) slowed to 1.8% in Q2 and is projected to rise slightly to 1.9% in Q3.
Private investment, which had already fallen in the first quarter, is estimated to drop by 13.0% in Q2 and is expected to decrease by an additional 6.9% in Q3. Meanwhile, the national private sector job vacancy rate held steady at 2.8% in Q2, representing approximately 397,500 unfilled positions across the country.
The report also includes a special analysis on tariffs and supply chains, noting that most businesses anticipate long-term disruptions both domestically and internationally. Supply chain challenges have become more pronounced since March 2025, with the wholesale and manufacturing sectors experiencing the greatest impact from delays at the Canada-U.S. border.
Simon Gaudreault, CFIB’s chief economist and vice-president of research, emphasized that while the economy is projected to contract, some indicators point to stabilization.
“While we forecast a contraction in the economy, at the same time certain indicators point out that it is normalizing in some ways. Inflation remains stable which puts us in a favourable position to contemplate easier monetary policy for the second half of the year. However, with Canada seeing a 1.9% inflation and unexpectedly adding jobs in June, the Bank of Canada may now decide to maintain its interest rate on July 30,” he said.
Gaudreault also addressed the impact of trade tensions on business sentiment. “The ‘one step forward, one step back’ trade situation is driving low business confidence, translating into paused or cancelled investments. As trade tensions drag on, more businesses will be slowly adjusting to tariff threats and findings alternatives,” he added.
The report highlights increasing concern within the wholesale industry, citing a notable decrease in the number of wholesale businesses with employees and a sharp decline in self-employed individuals, particularly over the past decade. These businesses continue to face significant challenges related to supply chain disruptions, rising input costs, and trade uncertainty, prompting them to adjust their pricing strategies in response.
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