A new forecast from the Canadian Federation of Independent Business (CFIB) suggests the Canadian economy could see the double whammy of rising inflation amid weaker growth.
Released Thursday, the CFIB’s latest Main Street Quarterly Report estimates the Canadian economy grew 0.8% in the first quarter of this year. However, it forecasts the economy will contract 5.6% in the second quarter. At the same time, headline inflation is projected to rise to 2.7% in the second quarter, up from a 2.4% advance in the first quarter.
CFIB chief economist Simon Gaudreault blamed the trade war, which is driving up costs for businesses, leading to inflation.
US President Donald Trump has slapped tariffs on several US imports from Canada, including steel and aluminum. The Canadian government has responded in kind, hitting imports of some American goods with retaliatory levies. China has tariffs on imports of some Canadian goods as well, including canola meal and oil, peas, and pork.
According to the CFIB, one-third of wholesale firms have already increased their prices, while two-thirds of firms in hospitality and construction plan to increase their prices once supplier costs stabilize.
The CFIB report said agriculture is among the Canadian businesses least able to pass on tariff-related costs and more likely to absorb them fully.
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