Canada may be heading into a stronger start to 2026, according to new projections from the Canadian Federation of Independent Business.
The organization’s latest Main Street Quarterly report outlines modest growth at the end of last year and a more positive outlook for the months ahead.
CFIB’s estimates, developed with AppEco, show the economy expanded by 0.6 per cent in the final quarter of 2025.
The group expects growth to reach 3.4 per cent in the first quarter of 2026.
Inflation reached 2.2 per cent year‑over‑year in the fourth quarter and is expected to edge slightly higher to 2.3 per cent early this year.
CFIB added that inflation remains close to the Bank of Canada’s target, though it cautions that global tensions and trade uncertainty continue to influence price pressures.
Private investment grew by 0.7 per cent in the fourth quarter but was still down 1.2 per cent compared with a year earlier.
CFIB projects a 3.5 per cent rebound in the first quarter, though it describes that level as modest.
Payroll employment rose by one per cent in the fourth quarter, bringing total job growth for 2025 to 0.4 per cent.
Employment growth is expected to accelerate to 2.6 per cent in early 2026.
The report also highlights ongoing challenges for small firms. CFIB notes the private‑sector job vacancy rate held at 2.8 per cent in the fourth quarter, representing 387,600 unfilled positions.
A special analysis of business‑to‑business and business‑to‑consumer firms found that both groups have become less optimistic since early 2025, though B2C firms have recovered more quickly.
CFIB points to weak demand, labour shortages and distribution issues affecting B2B firms, while B2C firms are dealing with limited physical space.
The organization’s sectoral profile shows business closures have outnumbered new entries for more than a year.
CFIB reports the trend is most pronounced in transportation, wholesale, and finance and insurance. Only the health and education sector is consistently seeing more new businesses than closures.
Simon Gaudreault, CFIB’s chief economist and vice‑president of research, said the findings reflect both resilience and risk.
“Canada’s economy remains relatively resilient, but inflation dynamics still depend on ongoing geopolitical tensions and global trade uncertainty,” he said in the release.
Gaudreault added that private investment has struggled but is showing early signs of improvement.
“Private investment declined by 1.2 per cent year over year, and it’s encouraging to see it slightly rebounding,” he said.
Gaudreault explained that small firms are adapting, but he believes investment needs clearer conditions and stronger policy support to grow.
He also warned that business closures continue to outpace new entries.
“Canada’s economic pulse depends on a healthy private sector,” Gaudreault said.
“We can’t keep losing businesses without new ones entering the market. This is a wake‑up call for policymakers to create a stronger and more competitive economic environment.”
Retail sales fell by 1.7 per cent in the fourth quarter, marking the first decline after several quarters of slowing growth.
CFIB expects that drop to be temporary, with sales forecast to rebound by 4.6 per cent in the first quarter of 2026.
The organization notes that retail spending grew by an average of 3.8 per cent in 2025, supported by easing inflation.
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