Canadian economy to see modest growth in the second quarter: CFIB

July 17, 2024 Mario Toneguzzi BusinessNews

The Canadian economy continued growing modestly in Q2 2024, finds the latest Main Street Quarterly report by the Canadian Federation of Independent Business (CFIB).

Key highlights of the Main Street Quarterly report for Q2 2024

  • CFIB’s forecasts in partnership with AppEco suggest the Canadian economy grew by 2.0% in Q2 on the heels of a 1.7% growth in Q1. The third quarter should continue growing at about the same pace as long as inflation remains under control and the central bank continues cutting rates.
  • The forecast for the total Consumer Price Index (CPI) inflation shows it receded to 2.8% in Q2 and is expected to further decline to 2.4% in Q3.
  • The national private sector job vacancy ratedecreased to 3.3% in Q2. This represents 458,000 unfilled positions.
  • The quarterly sectoral profile focuses on firms in the personal services sector. The analysis shows that historically high shares of repair and maintenance businesses as well as businesses providing personal care services are affected by borrowing costs and product input costs.
  • This edition also includes a special analysis of the sky-high cost of doing business. The overall business costs, measured by unit cost, are currently at a very high level. Total unit costs were stable before the pandemic but spiked by 26% during 2022 and remained elevated since.

Simon Gaudreault

Conclusions by CFIB’s chief economist and vice-president of research Simon Gaudreault:

  • The decent growth in the economy in the first half of 2024 correlates with a recent uptick in long-term business optimism. While encouraging, it doesn’t mean that all is well for small businesses. They’re still grappling with steep cost increases on all fronts, including wage pressures, significant energy and fuel costs, and high interest rates.
  • General uncertainty and various cost pressures are affecting small businesses’ ability to invest. After a surprise surge in Q1, private investment completely reversed course and declined to 2.8% in Q2.

Read the full Main Street Quarterly.

Helena Lopes

The Bank of Canada also recently released its Business Outlook Survey  which was conducted by in-person, video and phone interviews from May 9 to 29, 2024. The Business Leaders’ Pulse is conducted online every month; this report presents results from April, May and June 2024.

Overview

  • Firms’ sales outlooks are mostly unchanged from last quarter and remain more pessimistic than average. Businesses tied to discretionary spending reported particularly weak sales expectations, while those tied to essential spending see population growth continuing to benefit their sales.
  • Investment spending plans also remain below average. Weak demand, elevated interest rates, uncertainty about the business environment and the high cost of machinery and equipment were cited as discouraging investment. In this context, investment spending has become increasingly concentrated on upkeep and repair rather than expansion or improvements in productivity.
  • The share of firms reporting labour shortages is near survey lows. Still, few firms plan to reduce headcounts. Businesses attribute easing labour market conditions to a weaker economy and to rapid population growth.
  • Businesses expect the growth of their input prices and selling prices to slow, suggesting that inflation will continue to decline over the coming year. Most firms that made abnormally large price increases in the past 12 months do not plan to do so again in the coming year.
  • Firms’ expectations for inflation fell in June and are now in the Bank of Canada’s inflation-control range.

The Bank of Canada’s Canadian Survey of Consumer Expectations was conducted through an online panel from April 26 to May 15, 2024. Follow-up phone interviews took place from May 14 to May 23.

Overview

  • Consumers’ perceptions of inflation are unchanged from a quarter ago, but their expectations for inflation over the next 12 months have declined significantly. Both measures have improved substantially in recent quarters, although they remain higher than they were before the COVID‑19 pandemic. Most consumers continue to think that domestic factors—in particular, high government spending and elevated housing costs—are contributing to high inflation.
  • Sentiment remains subdued and unchanged from last quarter, as high inflation and elevated interest rates continue to constrain people’s budgets. Perceived financial stress remains high, most consumers continue to report spending cuts, and pessimism about future economic conditions persists. However, homebuying intentions are close to the historical average, supported by strong plans among newcomers to purchase a home.
  • Consumers’ perceptions of the labour market have weakened this quarter, especially among private sector employees. However, overall wage growth expectations reached a new survey high, driven by public sector employees who anticipate their salaries will catch up with the higher cost of living.

 

Mario Toneguzzi

Mario Toneguzzi is Managing Editor of Canada’s Podcast. He has more than 40 years of experience as a daily newspaper writer, columnist, and editor. He was named in 2021 as one of the Top 10 Business Journalists in the World by PR News – the only Canadian to make the list. He was also named by RETHINK to its global list of Top Retail Experts 2024.

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