New CFIB report forecasts GDP recovery but flags falling investment and surging costs
Canada's GDP is on track to rebound in the second and third quarters of 2026, but the recovery carries a sting for borrowers and the businesses that drive housing demand.
The Canadian Federation of Independent Business (CFIB), in partnership with economic consultancy AppEco, projects GDP growth of 2.7% in Q2 2026 and 1.6% in Q3, a meaningful turnaround after the economy contracted by 0.1% on an annualised basis in Q1. The forecasts are drawn from CFIB's June Business Barometer data.
Energy production is expected to shoulder much of that growth. Strong oil and gas output, alongside sustained construction activity, is projected to drive the headline figures, a tailwind that matters to brokers tracking client employment trends in Alberta and other resource-dependent provinces.
But the same energy surge is feeding inflation. The Consumer Price Index (CPI) rose to 3.1% year over year in Q2 2026 and is forecast to climb further to 3.4% in Q3, according to the CFIB/AppEco report.
Core inflation, excluding food and energy, dipped to 1.7% in Q2 but is expected to return to 2.0% in Q3, a trajectory complicated by ongoing geopolitical tensions in Iran that continue to put upward pressure on global energy prices.
Simon Gaudreault, chief economist and vice-president of research at CFIB in Canada, identified the tension at the heart of the current outlook.
"Given higher oil and gas prices and Canada's position as a major producer and exporter of energy, GDP is expected to post stronger growth in Q2 and Q3," he said.
"However, while rising energy prices are lifting GDP, they're also driving up costs on Main Street. There's a need for greater cost-of-doing-business relief and measures to help small business owners manage the ongoing challenges."
Investment weakness and what it means for brokers
The most sobering finding in the Q2 2026 Main Street Quarterly concerns private investment. After contracting in Q1 2026, investment is forecast to fall a further 6.3% in Q2 and 4.7% in Q3.
Gaudreault said uncertainty is forcing small business owners to scale back or defer spending on equipment, hiring, and expansion, the kind of caution that filters through to job creation and, ultimately, mortgage qualification capacity for clients.
Those pressures are documented across the report. Capital equipment and technology costs have climbed sharply since the pandemic, with 38% of small and medium-sized enterprises (SMEs) reporting challenges related to these costs in Q2 2026, on an upward trend.
In capital-intensive sectors, the share is far higher, transportation and utilities businesses reported this burden at 60%, according to the CFIB.
A weaker Canadian dollar has compounded the problem: CFIB estimates that a one-cent decline in the loonie increases annualised import costs for industrial machinery and electronic equipment by approximately $2.7 billion.
Sal Guatieri, senior economist at BMO Capital Markets in Toronto, told Canadian Mortgage Professional that "it's the economic uncertainty, both related to the trade war and the Iran war, that will likely keep a lot of buyers, especially first-time buyers, on the sidelines."
Brokers working with clients who are reassessing purchase timing will find that Dawn Desjardins, chief economist at Deloitte Canada, has linked resolution of key trade and policy uncertainties to the central trigger for recovery, saying: "As we get some clarity on some of these key issues impacting our economy, we do think that we will see business investment accelerate and this will create jobs."
Trade anxiety and the CUSMA effect
The report's In Focus section on trade documents a business community growing comfortable with diversification but frustrated by barriers to achieving it.
With CUSMA now shifting to annual reviews until 2036, about 35% of Canadian SMEs report it is too soon to determine the impact on their business plans.
Meanwhile, 64% of small business owners believe the government should take the time needed to secure the best possible agreement rather than rush an outcome.
Brokers serving clients across Ontario, British Columbia, and Alberta — provinces where CUSMA's impact on auto, forestry, and energy sectors is most acute — should note that business exit data in those regions remains weak.
Business exits have outpaced new entries for three consecutive quarters as of Q3 2025, marking the first sustained period of net business losses since the pandemic.
British Columbia recorded five consecutive quarters of net exits in that period, the weakest reading nationally.
Brokers monitoring the labour market will find some stability in the CFIB's job vacancy data. The private sector vacancy rate held at 2.8% in Q2 2026, representing approximately 393,000 unfilled positions across Canada, according to the CFIB's Business Outlook Survey and Statistics Canada's Labour Force Survey.
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