The most recent Main Street Quarterly, published by the Canadian Federation of Independent Business (CFIB), suggests that the Canadian economy will avoid a recession in the first half of 2023, while core inflation moderates and the Bank of Canada continues to pause interest rate hikes.
The report calls for a growth rate of 2.5 per cent in the first quarter of 2023, and 1.2 per cent in the second. “Consumer Price Index (CPI) inflation, both total and excluding food and energy, continued receding in the first quarter of 2023, reaching on a year-over-year basis 5.2 per cent for total CPI and 4.8 per cent for CPI excluding food and energy. The corresponding forecasts for the second quarter are 3.3 per cent and 3.7 per cent,” they write.
While inflation is moderating, they add that core inflation is forecast to be 2.8 per cent in the second quarter of 2023. “This is within the Bank of Canada’s one per cent to three per cent target range and therefore supports its decision to pause interest rate hikes,” says the CFIB’s chief economist and vice president of research, Simon Gaudreault.
“Analysis and forecasts based on small business data support a case for cautious optimism as we’re approaching the busy summer months. However, the costs of doing business remain historically high and the current business environment is unfavourable to pandemic debt repayment,” he warns. “Going forward, stronger revenues and more certainty will be essential to supporting a true business recovery in 2023.”