After navigating a year of economic turbulence, Canada is on track for a period of modest recovery and growth starting in the first quarter of 2026, according to a key report from the nation's small business sector.
Modest Growth on the Horizon After a Challenging 2025
The latest Main Street quarterly report from the Canadian Federation of Independent Business (CFIB), released on January 16, 2026, projects the economy will expand by 3.4 per cent in the first quarter of 2026. This anticipated acceleration follows an estimated growth of just 0.6 per cent in the final quarter of 2025.
The report characterizes 2025 as a "turbulent" year for the Canadian economy. Following a contraction in the second quarter and a rebound in the third, year-over-year growth slowed to 0.9 per cent by December. Overall, GDP growth for 2025 settled at 1.7 per cent, a slight increase from the 1.6 per cent recorded in 2024.
Resilience Amidst Global Uncertainty and Inflation Trends
Despite persistent geopolitical tensions and global trade uncertainty, the CFIB notes that Canada's GDP growth has remained "relatively resilient." On the inflation front, the Consumer Price Index (CPI) rose to 2.2 per cent year-over-year in Q4 2025 and is expected to edge up slightly to 2.3 per cent in Q1 2026.
While total inflation is close to the Bank of Canada's target, the business federation cautions that inflation dynamics continue to depend on these unresolved global issues. The report is developed in partnership with consulting firm AppEco, using data from CFIB's business outlook survey to create early short-term forecasts.
Private Investment Steadies, But Policy Changes Are Urged
A notable finding from the report is that private investment in Canada steadied during the fourth quarter of 2025, even as lingering uncertainty affected business plans. While private investment declined by 1.2 per cent year-on-year, the CFIB forecasts a recovery of 3.5 per cent in the first quarter of 2026.
"It’s encouraging to see it slightly rebounding," the report stated, noting that small businesses are adapting to new trade realities. However, the CFIB argues that bold policy changes are necessary to fuel a stronger recovery. Key recommendations include:
- A reduction of taxes and bureaucratic red tape.
- The removal of internal trade barriers.
The report serves as a "wake-up call for policymakers" to foster a more competitive economic environment. It warns that Canada's economic pulse relies on a healthy private sector and cannot afford to lose businesses without new ones entering the market.
In the labour market, the private sector job vacancy rate remained unchanged at 2.8 per cent in Q4 2025, representing approximately 387,600 unfilled positions across the country. The CFIB, which represents 100,000 small and medium-sized business members, emphasizes that the nation's economic resilience ultimately depends on supporting this core sector.
