In July, the business opening rate contracted by 0.6% compared with its July 2021 level (5.2%). The business closure rate rose by 0.7% to settle at 4.6%. As the number of openings and closures was similar, the number of active businesses remained relatively unchanged. These were the largest variations in openings and closures not necessarily attributable to public health restrictions since the onset of the COVID-19 pandemic. The Canadian Survey on Business Conditions (CSBC) showed that businesses expect to continue to face challenges related to rising inflation and costs of inputs, as well as supply chain issues during the third quarter of 2022.

The decrease in the number of business openings in July compared with the previous year was entirely driven by fewer business re-openings. Indeed, the 0.1% increase in the entry rate (1.8%) was offset by the 0.8% decline in the re-opening rate, which dropped for the second consecutive month. The re-opening rate (2.7%) settled at its lowest level since February 2020, 0.2% below its historical average from 2015 to 2019.

The business opening rate in July (2.8%) dropped by more than half (-2,709 businesses) in the other services industry (except public administration) compared with July 2021 (6.7%). This industry led the decline in the overall number of openings. The industry was followed by accommodation and food services (3.4% compared with 4.8%; -803), retail trade (3.2% compared with 3.8%; -480) and arts, entertainment and recreation (4.3% compared with 6.3%; -230). In the other industries, the number of business openings increased or changed little.

Compared with the previous year, the increase in the business closure rate in July was widespread across industries. This rise was driven by construction (+0.5%; +797 closures) followed by accommodation and food services (+0.9%; +638). According to the CSBC, these were the two industries with the highest proportion of businesses that were expecting inflationary pressures to be the major obstacle in the third quarter of 2022. Accommodation and food services, which posted a decline in GDP for the first time since January 2022, was also the third industry with the largest proportion of businesses fearing rising costs of inputs in the coming months.

The series on temporary business closures and exits (or “permanent closures”) is now updated to include data up to January 2022. The exit rate dropped slightly from 1.6% in January 2021 to 1.5% in January 2022. In January, for the fifth consecutive month, the exit rate remained below its historical average from 2015 to 2019 (1.7%).

In January 2022, with the exception of the mining, quarrying, and oil and gas extraction (+0.4%) and transportation and warehousing (+0.3%) industries, the exit rate was within 0.2% of its January 2021 level in all industries. Although the exit rate in the transportation and warehousing industry (2.2% exit rate compared with 1.5% historical average) was furthest from its historical average, it held steady or dropped for the fifth consecutive month. The exit rate remained at 2.4% in the real estate and rental and leasing industry, 0.5% above its historical average. Conversely, the accommodation and food services (1.2% compared with 1.6%) and manufacturing (0.7% compared with 1.0%) industries had the lowest exit rates relative to their respective historical averages.

Source: Statistics Canada