Message from the Business Data Lab

Canada’s economy is holding steady, but the underlying signals point to a business environment that is not yet set up for stronger growth.

This edition of Business Insights Quarterly captures conditions prior to the latest geopolitical developments in the Gulf and already shows an economy losing momentum beneath the surface. Growth is continuing, but it is increasingly fragile, with demand softening and investment intentions subdued.

Business sentiment reinforces that picture. Expectations have remained below neutral for seven consecutive quarters and confidence — particularly among exporters — continues to weaken. At the same time, Canada is seeing limited net business formation and a growing divide between large firms and small businesses. Job creation is increasingly concentrated among larger firms, while smaller businesses — typically a key engine of growth — remain cautious.

Taken together, these are not just cyclical signals. They point to a business climate that is not fully conducive to expansion, scaling and nation building, particularly for small and mid-sized firms.

The labour market is stalling rather than weakening. As economic conditions remain choppy, hiring has little momentum. Vacancies are easing and labour supply is improving, but businesses remain cautious. Skills gaps persist across industries, and many firms are responding by training their workforce rather than expanding headcounts. Wage growth remains elevated but is stabilizing, pointing to adjustment rather than acceleration.

Trade remains the defining pressure shaping business behaviour. A year after a wave of tariffs and trade disruptions, most firms are still adapting cautiously. While exports to non-U.S. markets are growing, this is being driven by existing exporters doing more, not by new firms entering global markets. Meanwhile, USMCA utilization remains at a 20-year high, underscoring the importance of existing trade frameworks.

Importantly, most businesses are not fundamentally changing course. The most common response to trade pressure remains raising prices or delaying decisions, rather than diversifying markets or supply chains.

Across all these themes, the message is consistent: Businesses are adapting but cautiously and often defensively.

With weak demand, persistent uncertainty and limited small business dynamism, the risk is not an abrupt downturn but a gradual erosion of Canada’s growth capacity. Strengthening the conditions for investment, scaling and market expansion will be critical to shifting the outlook from resilience to sustained growth.

The Business Data Lab will continue to track these developments — providing timely, data-driven insights to help businesses and policymakers respond to a rapidly evolving economic environment.

Patrick Gill

Vice President, Business Data Lab, Canadian Chamber of Commerce