Canada’s population might be booming but fewer entrepreneurs are seeing opportunity. Statistics Canada (Stat Can) data shows a sharp reduction in the number of business openings in July. The unusually large decline saw new businesses form at the slowest pace since the start of the pandemic. This is just the latest data point to show fading economic growth as Canada leaves entrepreneurs high and dry in favor of doubling down on a housing economy.
Canada Sees The Fewest Businesses Open Since March 2020
Canada has seen a sharp reduction in monthly new businesses started. Seasonally adjusted, just 36.7k new businesses were started in July, about 14% (-6k) less than a month before. Compared to last year, the decline was also about 14% lower. How unusual is this volume? Canada hasn’t seen a month with fewer new businesses since March 2020. Considering the population growth, and additional demand it should bring, that’s an ominous sign.
Canada Just Saw The Fewest New Businesses Open Since March 2020
Seasonally adjusted monthly new business openings.
Source: Statistics Canada; Better Dwelling.
Canada Is Also Seeing Fewer Businesses Close
On the upside, fewer businesses are shutting their doors. There were 41.9k business closures in July, a decline of 1.4% (-578 businesses) closures from a month before. Compared to last year, monthly closures are down by 3.1% (-1.4k businesses). Fewer closures is good news but the reduction was much smaller than the reduction in new businesses. This weighs on the total number of active businesses in the country.
Canada Has Seen A Pullback In The Number of Total Businesses
Canada’s total number of active businesses refuses to grow these days. The number dropped 0.2% (-1.4k businesses) to 931.7k active businesses in July. While that’s a pullback, the number remains 0.4% (+3.7k businesses) higher than last year. Hanging onto some positive annual growth is good news, but a rate smaller than population growth indicates a few problems.
Higher interest rates certainly aren’t helping by throttling credit growth. However, even before rate hikes, Canada saw a sharp reduction in entrepreneurs. A combination of eroding business conditions and limited household demand has resulted in a less-than-ideal business environment.
Canada’s economy resembles a textbook example of late business cycle dynamics. Inflation is eroding spending power, household demand is falling, and sky high home prices consume a large share of income from younger households. The country’s largest bank recently pointed out, this can slow an economy sharply in a way that can’t be made up by older households.