Canadian economy to see modest growth in the first half of the year: CFIB forecast

The Canadian economy is expected to see positive growth in the first and second quarter of 2024, says the latest Main Street Quarterly report by the Canadian Federation of Independent Business (CFIB).

CFIB's forecasts suggest the Canadian economy rebounded to 0.8 percent in the first quarter of 2024 and will grow to 0.9 percent in the second quarter on a year-to-year basis. Consumer Price Index (CPI) inflation, both total (2.8 percent) and excluding food and energy (2.9 percent), continued its downward trend in the first quarter and this trend is expected to persist in the second quarter. Driven by low long-term small business confidence, private investment contracted for the third consecutive quarter in the first quarter. It's expected to keep declining in the second quarter, although at a slower pace.

“All eyes were on the Bank of Canada this week ahead of its monetary policy decision,” says Simon Gaudreault, chief economist and vice president of research at CFIB. “As widely expected, the Bank took a wait-and-see approach for a sixth consecutive time and didn't announce any rate cuts. With more signals showing that inflation is generally getting under control, there's bigger pressure on the Bank to lower rates in the near term. The Bank's restrictive policy is not going to help SMEs in the next few months as they're continuing to face headwinds as shown by a decrease in investment and a high level of insufficient demand.

“Our forecasts suggest that the economy will see positive growth in early 2024. However, business owners remain modestly optimistic about the future of their business and will be watching the upcoming federal budget closely for any sign of meaningful cost relief, as well as the start of widely anticipated interest rate cuts in the upcoming months that could improve sales and lower financing costs.”