Canada's gross domestic product (GDP) growth is expected to slow from 2.0 percent in the third quarter of 2026 to 1.4 percent in the fourth quarter, as tariffs and higher fuel costs pressure small businesses, according to the Canadian Federation of Independent Business (CFIB).
The findings appear in CFIB's latest Main Street Quarterly report, which includes economic estimates and forecasts developed in partnership with AppEco.
The report forecasts Consumer Price Index (CPI) inflation of 3.0 percent in the third quarter and 2.9 percent in the fourth quarter. It also projects private investment plans to grow 5.2 percent in the third quarter and 1.6 percent in the fourth quarter.
Rising costs are affecting businesses' pricing decisions. According to the report, 39 percent of businesses plan to increase prices by more than three percent over the next 12 months.
The Canada-US trade war is driving pricing pressures, with most businesses expecting to pass on at least some tariff-related costs to customers. Nearly three in 10 businesses, or 28 percent, plan to pass on the full amount, while 18 percent have yet to determine their pricing approach.
The report's special analysis of fuel costs found that approximately seven in 10 businesses expect to pass on less than half of the higher costs despite recent increases.
“Many businesses have been dealing with soft demand and weak sales. With customers holding back, most are absorbing higher fuel costs rather than risk losing sales,” said Simon Gaudreault, CFIB's chief economist and vice-president of research.
The report also examined the relationship between long-term business optimism and business formation. It found that business optimism declined sharply over the past four quarters, while net business formation deteriorated and turned negative.
Meanwhile, the private sector job vacancy rate edged down to 2.6 percent in the third quarter, representing 375,000 unfilled positions.
Gaudreault said businesses face different economic conditions, with some more affected by recent macroeconomic events while others continue to show resilience.
“Aggregate data is currently masking a tale of mixed business fates, and there is still significant uncertainty about when the Canadian economy will be able to really rebound, following the latest episodes of this trade war,” Gaudreault said.