Weekly Digest – 21 March 2025
Small Business Optimism in Canada Plunges to a 25-Year Low
Small business confidence in Canada hit an all-time low in March, lower than during the pandemic or the 2008 financial crisis, according to CFIB. The Business Barometer index fell to 25 as sentiment across all sectors declined. Facing uncertainty from the U.S. trade war and new Chinese tariffs on canola oil, pork, and seafood, businesses plan to raise prices by 3.7%, cut wage increases, and consider layoffs. Weak demand is also at a record low, affecting 59% of small businesses. The CFIB is urging tax-free carbon rebates, a higher capital gains exemption, and more tariff relief. The federal government announced $6 billion in aid and $1 billion for agriculture, while provinces like Ontario and Manitoba are offering tax deferrals and industry support. With no clear end to tariff disruptions, businesses remain deeply concerned about future stability.
.https://financialpost.com/news/canada-small-business-confidence-record-low
Positive Trend”: Economist Predicts Continued Housing Affordability Improvement in 2025
Housing affordability in Canada improved in 2024 and is expected to continue improving in 2025, according to National Bank Economist Kyle Dahms. Lower mortgage rates, rising incomes, and stable home prices have helped, though mortgage payments still exceed 50% of income nationally. Mortgage rates have declined by 75 basis points since late 2023, with further relief expected from Bank of Canada rate cuts. However, economic uncertainty, particularly trade tensions and tariffs, is impacting the real estate market. February home sales fell 10.4% year-over-year, and rising unemployment could slow housing demand. While uncertainty may weigh on home prices, National Bank expects stability rather than sharp increases or declines. If economic conditions worsen, unemployment could rise, affecting affordability. For now, the housing market remains in a neutral stance, with no major price surges or drops anticipated.
The Role of Pensions in Retirement Income, Tax Strategies, and Investment Planning
Retirement income strategies must align with employer pensions. Financial planner Jason Evans structures DB pensions to cover core expenses, while those with DC plans should optimize CPP and OAS benefits, often deferring them for higher payouts. Creating a steady income stream encourages spending confidence in retirement.
Tax efficiency is crucial. Wealth advisor Laura Southall highlights pension income splitting and strategic withdrawals to minimize lifetime tax burdens. Timing CPP and OAS benefits depends on inflation adjustments and survivor benefits, says Darius Muica. He advises deferring CPP over OAS for better financial security.
DB pensions function as fixed income, allowing for growth investments elsewhere. DC pensions require more personal investment management. Holding capital gains and dividend-generating assets in non-registered accounts optimizes tax efficiency. Smart estate planning prioritizes growth in TFSAs and non-registered accounts over RRSPs/RRIFs to reduce taxation at death.
Rising Inflation Expectations Signal Risks for Variable Rates
Canada’s inflation rose to 2.6% in February from 1.9%, partly due to the end of GST/HST tax breaks. TD Economics’ James Orlando warns inflation could exceed 3% soon, independent of tariffs. The ongoing trade war, with new U.S. tariffs set for April 2, is expected to last six months, causing economic strain. Despite strong domestic spending, TD predicts Canada will enter a shallow recession with two consecutive quarters of negative growth. Without tariffs, the economy was recovering, potentially prompting a pause in rate cuts. However, uncertainty over the scope and duration of tariffs is shaking business and consumer confidence. Government support may help, but full trade stability is unlikely to return. As Canada navigates this economic turbulence, inflation and recession risks remain key concerns for policymakers and businesses.
What Will Get Cheaper After the Carbon Tax Cut on April 1
Canada’s consumer carbon tax will be eliminated on April 1, lowering gas and home heating costs but likely having little impact on grocery prices. The tax previously added over 17 cents per litre to gasoline, so drivers should see immediate relief at the pump. Natural gas prices are also expected to fall by 12.8%. However, experts say food prices won’t drop significantly since multiple factors, including labour, energy, tariffs, and supply chain costs, influence grocery costs. The tax cut is expected to reduce April’s inflation rate by 0.7%, bringing it to 2.1%, but ongoing tariff-related price hikes may offset any relief. Conservative Leader Pierre Poilievre has pledged to eliminate the industrial carbon tax as well, arguing it makes Canadian food production less competitive. A full repeal could further ease costs for farmers, manufacturers, and transport companies.
.https://nationalpost.com/news/canada/cheaper-after-carbon-tax-cut