Arcus Consulting Group – Economic Insights
Low growth, easing inflation, and cautious investment mark a year of transition for Canadian firms.
1. The macro-backdrop: low growth, soft demand
The Canadian economy has entered a new phase — not a sharp recession, but a strategic reset. According to the Bank of Canada’s recent staff analytical note, Canada’s potential output growth between 2025 and 2028 is estimated at just 1.1 %-1.6 % per annum under alternate scenarios. Bank of Canada Meanwhile, data released by Statistics Canada show that real GDP by industry slipped by 0.1 % in April 2025. Statistics Canada
For business leaders, this means growth head-winds. Firms cannot rely on a strong cyclical rebound alone. Instead, effective leadership will treat 2025-26 as a base-building period.
2. Key indicators — what the numbers say
Here is a snapshot of relevant data for executives assessing the near-term environment:
| Indicator | Latest value / change | Significance for business leaders |
|---|---|---|
| Real GDP (by industry) – Apr 2025 | –0.1% monthly change. Statistics Canada | Indicates contraction in goods-producing sectors; firms need cost and risk focus. |
| Potential output growth (2025-28) | 1.6 % (Scenario 1) / 1.1 % (Scenario 2) Bank of Canada | Suggests structurally muted growth ahead; margin enhancement becomes critical. |
| Labour productivity (business sector) – Q1 2025 | +0.2% growth. Statistics Canada | Very modest productivity gain; highlights the challenge of generating growth from efficiency. |
3. Strategic implications for firms
In this slower-growth backdrop, business leaders should pursue three interlocking priorities:
a. Cost and cash-flow discipline. With revenue growth likely to be modest, preserving margins becomes central. Firms should revisit fixed cost structures, renegotiate supplier terms and strengthen working-capital controls.
b. Investment phased with optionality. Big, irreversible capital decisions carry more risk in a muted growth environment. Firms should design investment programs in stages, with go/no-go decision points as data evolve.
c. Build resilience in supply-chains and operations. A reset economy means higher probability of disruptions—whether trade, labour or inflation-related. Executives need scenario-planning, diversified sourcing and agility in operations.
4. Opportunity amid transition
A reset year also offers opportunity. With inflation gradually easing and interest rates likely to remain elevated / begin to normalise, firms that invest early — in digital, automation, supply-chain resilience — will gain an edge when growth returns.
Government investment is another anchor. For example, infrastructure and transition-capex (see Article 4) provide demand pockets that astute firms can align with.
Media and executives should treat 2025 not as a hiatus but a strategic pause — those who reposition now will be first movers when upturn arrives.
5. A leadership checklist
- Review scenario plans with growth assumptions of ~1%-2%.
- Develop buffering strategies for margin erosion.
- Identify low-hanging digital and operational productivity projects.
- Build optionality into cap-ex commitments (e.g., modular equipment, phased roll-out).
- Monitor cues for turning point: real GDP inflection, export rebound, inflation declining.