Canada’s economy hit a technical recession at the end of 2023 and will continue to struggle to grow in the new year, according to forecasts from the Canadian Federation of Independent Business.
The CFIB projection released Tuesday suggests the Canadian economy contracted 0.2 per cent in the final quarter of 2023. Statistics Canada reported last year that real gross domestic product also contracted slightly in the third quarter.
If accurate, the two consecutive declines in real GDP would constitute a technical recession.
StatCan’s own projections for the fourth quarter of 2023 won’t be released until the end of February, though its latest GDP reports show economic growth was likely flat to start the third quarter with a possible uptick in November.
The CFIB forecasts have the Canadian economy rebounding with 0.5 per cent growth in the first quarter of the year.
CFIB chief economist and vice-president of research Simon Gaudreault said in a statement Tuesday that despite the forecasted Q4 downturn, the picture is a bit more “nuanced” than the headline figures suggest.
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Business sales and employment continue to show signs of strength, he said, but indications of optimism from CFIB members are weak. Manufacturing businesses in particular are feeling increasingly pessimistic amid declines in demand both domestic and abroad.
Business investment plans, too, are at an all-time low in CFIB’s surveys. The organization said small businesses are less inclined to invest in their own operations under the weight of “general uncertainty, various cost pressures and tax increases.”
A lack of business investment has been hailed as a weakness in the Canadian economy, with experts recently telling Global News that dwindling spending here is fuelling inflationary pressures and a reliance on immigration to grow the economy.
CFIB predicts that the average inflation rate will be lower than in recent years at 3.1 per cent for 2024. Most businesses are considering raising prices this year, but fewer firms are planning hikes than in previous years, in keeping with the findings of Bank of Canada surveys last week.
The CFIB projections come a day ahead of the Bank of Canada’s first interest rate decision of the year, when the central bank is widely expected to hold its policy rate steady. The central bank will also release its own revised projections for inflation and the Canadian economy on Wednesday.
But given the slowdowns already seen in the economy and the “breadth of challenges” facing small businesses in the year ahead, CFIB is calling on the Bank of Canada to “seriously consider making monetary policy less restrictive as of next spring.”
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