TORONTO — Growth in the number of Canadian businesses stalled in the fourth quarter with the 0.1 percent gain, marking the slowest pace of increase since the recession, RBC Economics reported.
This marks the sixth consecutive quarter of growth below the post-recession average, noted economist Gerard Walsh.
“Firm count data is noisy and revision-prone but at this point it is clear that growth in the number of new businesses has slowed markedly,” he explained. “While a steep decline in the number of firms in the oil and gas sector has contributed to the weakening trend, the data show the growth rate for nearly all industries stands below their post-recession averages.”
The Bank of Canada noted in the past that growing firm counts are a key indicator of the economy’s overall health. This slowing will feed into the bank’s concerns about the persistence of slack in the economy that will likely result in the bank holding monetary policy steady throughout 2017, said Walsh.
Business enterprise counts expanded 0.1 percent year-over-year in the fourth quarter, slower than the third quarter’s 0.3 percent gain.
The number of business enterprises was 1.11 million in the fourth quarter of 2016. On a year-over-year basis, firm counts were up 0.1 percent or 1,000, well below the 0.9 percent average growth in firm counts observed in the post-recession period.
Firm counts expanded in a number of industries with the fastest growth observed in arts, entertainment and recreation (+2.4 percent); transportation and warehousing (+1.6 percent); and real estate and rental and leasing (+2.2 percent). Rising firm counts in these industries are in keeping with strong increases in output over the past year.
However, firm counts in the mining, quarrying, oil and gas sector continued to decline (–15.3 percent since the peak of oil prices in 2014 Q2). The decline in manufacturing firm counts accelerated to –0.5 percent in 2016 Q4 and a fillip of growth early in 2016 was revised away. Since 2000, the number of manufacturing firms has declined by 14 percent.
Employment associated with new entries increased by 3 percent to an annualized rate of 186,000 while employment losses associated with firm exits was flat at 144,000. According to this measure and including employment gains in incumbent firms, overall business sector employment rose by 106k in the fourth quarter.
SOURCE: RBC Economics press release