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The business opening rate decreased from 4.9% in May to 4.2% in June, its lowest level since March 2020. The business closure rate grew 0.2 percentage points to 4.8% in June 2023, following a similar decline in May. The business opening rate was 0.5 percentage points below its pre-COVID-19 pandemic level in June, while the closure rate was 0.2 percentage points above its pre-pandemic level.
Chart 1: Monthly business openings and closures as a percentage of active businesses, business sector, January 2021 to June 2023, seasonally adjusted data
As there were fewer openings than closures, the number of active businesses shrunk 0.8% or by 7,327 in June, following a 0.5% increase in May. Real gross domestic product also fell in June (- 0.2%), following an equivalent rise the previous month.
The decrease in the business opening rate in June was largely driven by the re-opening rate which dropped from 3.1% to 2.5%, its lowest level since December 2015. The entry rate edged down 0.1 percentage points to 1.7% in June. The re-opening rate was 0.4 percentage points below its 2015-to-2019 historical average, whereas the entry rate was just below its historical average of 1.8%.
Chart 2: Business opening rate and its components, business sector, January 2021 to June 2023, seasonally adjusted data
The decrease in the business opening rate in June was widespread across sectors. Transportation and warehousing (-895 openings; or -1.7 percentage points compared with the previous month) led the decline, followed by professional, scientific and technical services (-745; -0.6 percentage points). Construction (-0.6 percentage points) and health care and social assistance (-0.7 percentage points) both posted 701 fewer business openings.
Business insolvencies reach highest level since 2014 in the second quarter
The business closure rate rose in all sectors in June. The increase in the overall rate was mainly driven by construction (+674 closures; or +0.6 percentage points compared with one month earlier), retail trade (+581; +0.7 percentage points) and accommodation and food services (+429; +0.7 percentage points).
The construction, retail trade, and accommodation and food services sectors also reported the sharpest declines in the number of active businesses and the largest increases in business insolvencies in June 2023. In the second quarter, business insolvencies reached their highest level since 2014, mainly driven by these three sectors.
In the same quarter, businesses in accommodation and food services (68.4%) and retail trade (63.8%) were among the most likely to expect obstacles related to rising inflation which was the most common challenge expected by businesses.
The series on temporary business closures and exits (or "permanent closures") is now updated to include data up to December 2022
The exit rate grew from 1.7% in November to 1.9% in December 2022, slightly above its historical average of 1.7%. The exit rate edged up or remained relatively unchanged in all sectors in December.
The exit rate remained further away and higher than its historical average in transportation and warehousing (2.7% exit rate compared with 1.5% historical average), real estate and rental and leasing (2.4% compared with 1.9%) and professional, scientific and technical services (2.0% compared with 1.7%).
- Experimental estimates for business openings and closures for Canada, provinces and territories, census metropolitan areas, seasonally adjusted
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