Core Insights - Canadian small businesses are experiencing financial pressures due to macroeconomic factors, uncertain trade relations, and shifts in consumer spending, with a reported 0.4% decline in real GDP impacting the overall business outlook [1] - The Canadian Small Business Health Index has decreased by 1.6% in Q2 2025, influenced by trade tensions and a widening trade deficit, although lower inflation and interest rate cuts provided some relief [2] Financial Stress and Delinquencies - Over 286,000 businesses missed at least one credit payment in Q2 2025, a 5.6% increase from the previous year, with financial credit delinquencies rising by 13.5% to a rate of 3.48% [3] - The manufacturing sector is facing uneven financial stress, with a 1.3% increase in delinquent trade, particularly in Heavy Metal Manufacturing, which saw a 12.1% spike in delinquencies [4] - Ontario reported a 4.3% year-over-year increase in businesses missing payments, with financial delinquencies rising by 11.8% and industrial trade delinquencies by 5.5% [5] Regional Variations - Prince Edward Island experienced a 15.6% rise in delinquent businesses, while Nova Scotia saw an 8.9% increase; in contrast, Alberta reported a 2% decrease in delinquent businesses [6] - The uneven impact of financial stress across regions highlights that small business challenges are not uniform, with critical areas likely experiencing deepening financial strain [6] Consumer Spending Trends - The average credit card spend per consumer declined by 0.4% from June 2024, indicating a pullback in discretionary spending, which has led to higher delinquency levels in consumer-sensitive sectors [7] - Delinquencies in Accommodation and Food Services increased by 29.5%, Retail Trade by 13.3%, and Arts, Entertainment, and Recreation by 7.5%, reflecting the impact of rising costs of essentials on household budgets [7] Business Growth and Credit Demand - The Growth Projection component of the Canadian Small Business Health Index fell by 2.4% year over year, driven by a decline in credit inquiries and new originations, as businesses are hesitant to invest [8] - Overall business credit inquiries dropped by 1% from Q2 2024, but rose by 7% from the last quarter, particularly in sectors facing significant job losses [9] Economic Outlook - The full economic impact of trade tensions and rising unemployment is expected to unfold gradually, with varying effects across regions and sectors as economic headwinds continue [10]