Canada's sub-1% growth year: where mid-market margin comes from
The PBO now sees 0.9% growth in 2026 and 1.5% in 2027, with new US tariffs. When the market won't grow for you, the spend you control has to do more.
When the economy grows at under 1%, margin has to come from inside the business. On October 20, the Parliamentary Budget Officer cut its forecast for Canadian real GDP growth to 0.9% for 2026, from 1.1% in June, and to 1.5% for 2027, citing new US tariffs. For a mid-market company, that means the market won't do much of the work in the next eighteen months.
What does the forecast say?
Beyond growth, the PBO expects inflation to average 2.8% in 2026 and 2.4% in 2027, and assumes the Bank of Canada starts raising its policy rate in early 2027, reaching 2.75% by mid-year. Slow revenue, sticky costs and the prospect of higher borrowing costs: that combination puts margin under pressure from both sides.
Why does third-party spend matter more in a slow year?
Because it keeps rising when revenue doesn't. Software, cloud, media and service contracts carry their own price increases, and many are priced in US dollars. Those increases arrive at renewal whether or not the year was good.
It is also the spend a company controls most directly. Price can't be forced up in a slow market, and headcount cuts carry real costs. Contracts renew on dates you can see coming.
Where should a Canadian mid-market company look first?
- Renewals in the next twelve months, with notice dates and the increase each vendor is likely to ask for.
- Agency and media fees against the scope delivered. See how to audit a marketing budget like any other cost center.
- Overlapping software from different teams or past acquisitions. See our SaaS rationalization guide.
- Telecom and other lines nobody has reopened in years. See telecom contracts, the forgotten line.
None of this needs a restructuring. It needs someone to own the list and work through it.
Where to start
A Diagnostic works through one cost base in four weeks and returns a ranked list with a baseline for each finding. If one renewal or proposal is on your desk now, a Second Opinion answers it in writing in five business days.
Sources: CP24, PBO trims economic forecast for 2026 and 2027 amid new US tariffs, October 2026.
What is the PBO's growth forecast for Canada?
In October 2026 the Parliamentary Budget Officer forecast real GDP growth of 0.9% for 2026 and 1.5% for 2027, citing new US tariffs.
Where can a mid-market company find margin in a slow economy?
Start with third-party spend: upcoming renewals, agency and media fees, overlapping software, and contracts nobody has reviewed in years.
Practical notes on agencies, media, software and vendor cost.
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