Well, despite the talk of recession and rumours of recession in the wake of Bank Rate increases around the world, to date the economy not just in Canada and also the United States and indeed in many other countries, remains relatively robust. At the same time, inflation is coming down. The narrative is only slowly starting to shift to explanations of why the economy is doing so well with a myriad of possible stories, the most entertaining is that what we are having is a “vibecession” in which people continue to spend unabated while externalizing anxiety that a recession is coming with the anxiety being aided and abetted by constant media stories on why interest rate increases will eventually bring a recession. Or perhaps we are experiencing some type of economic cognitive dissonance in which spending all that pandemic cash makes us uncomfortable, so we project fears of coming recession to assuage our consumer guilt. Needless to say, interest rates are continuing to rise and at some point there may or may not be a recession.
In the interim, any indicator is useful. Statistics Canada has put out experimental monthly business data (Table 33-10-0279-01) that estimates the total number of active businesses as well as openings and closures for Canada, the provinces and Census Metropolitan Areas. If there are glimmers of recession in the air, one might expect to see a slowdown in the growth of total active businesses or even a decline is business closures exceed new openings. Figures 1 and 2 provide charts of some this data (Total active businesses and business closures) for Canada, Ontario, and four Ontario cities (Thunder Bay and Sudbury are included as after all this is Northern Economist). And, because of the size differences between national level and CMA data, an index is calculated and used with January 2022 numbers set to 100 for all.
Both Canada and Ontario are above where they were in January of 2022 in terms of the total active number of businesses. Since January 2023, there was a bit of a decline though it was followed by a rebound from March to April of 2023 where the data ends. This pattern appears to also mark Toronto and Hamilton. However, Greater Sudbury has seen a persistent decline since May of 2022 as did Thunder Bay though it was followed by a rebound after February 2023. Nevertheless, all these geographic entities had more active businesses in April 2023 than at the start in January of 2022. This suggests that overall, there have been on average more openings than closures. Figure 2 plots an index of business closings and again there are fluctuations but no discernible overall upward trend over the January 2022 to April 2023 period. If anything, there was a rise in business closures from about June 2022 to October 2022 and then a decline in business closures from about October of 2022 to January 2023 with a reversal since.
The Bank of Canada began its current tightening cycle in March of 2022 and within a few months the number of closures began to rise but that was soon reversed. Overall, there have been healthy amounts of new businesses created that have countered closures explaining why overall, the number of active businesses are up. This data suggests that any recession if at all is still down the road. Or, the soft landing that was envisioned is what has been engineered.
