Fuel price spikes and weak consumer spending continue to squeeze revenue and payment timelines for small businesses nationwide
Canadian small businesses posted their third consecutive quarter of declining sales in the three months to June 2026, as elevated gasoline prices and soft household budgets continued to erode revenue and stretch cash flows across the country.
New data from Xero shows that aggregate sales among approximately 12,000 Canadian small businesses tracked through the Xero Small Business Insights (XSBI) program fell 0.6 per cent year-over-year in the second quarter of 2026.
It’s the latest in a string of quarterly contractions that now stretches back to December 2025. Over the prior year, sales came in below year-ago levels for eight of the past twelve months, according to the July 30, 2026 report.
The data reinforces a picture of sustained operating pressure that may have direct implications for client cash flow, investment capacity, and succession planning timelines.
Sales declined 2.7 per cent year-over-year in April and 3.0 per cent in May, according to Xero, before rebounding 3.8 per cent in June as gasoline prices dipped below $1.70 per litre — temporarily freeing up household spending. Xero's economist cautioned, however, that its late-reporting adjustment has been over-correcting in recent months, and the June result is likely to be revised downward in subsequent reports.
"Overall, the biggest positive from this data is that performance didn't get worse, but it is not improving much either," said Louise Southall, economist at Xero. "The continued geo-political conflicts and uncertainty have made conditions harder for Canadian small businesses, building on the impact of US trade policy since April 2025. Gasoline prices peaked in May, and while various ceasefire agreements have offered brief relief, none have been able to hold for more than a few weeks."
The OECD projects Canadian GDP growth will reach 1.2 per cent in 2026, recovering from the trade-related slowdown triggered by higher US tariffs — a modest rebound that does little to insulate small business owners from near-term cash flow strain.
Payment times also remain a concern. Canadian small businesses were paid an average of 11.3 days late in the second quarter, comparable to the 11.4 days recorded in the first quarter, but notably worse than the 10.5-day average seen across 2025, Xero reported. The total time from invoice issuance to receipt of payment stood at 29.0 days in the June quarter, down slightly from 29.2 days in March but well above the 27.1-day average recorded through 2025.
Regional picture: Alberta leads, B.C. and Ontario lag
The XSBI data, which this quarter expanded its provincial coverage to include the Maritime Provinces (combining New Brunswick, Nova Scotia, and Prince Edward Island), shows wide regional variation in small business performance.
Alberta recorded the strongest provincial result, with sales up 1.0 per cent year-over-year — a regional beneficiary of elevated global oil prices. The Maritime Provinces registered roughly flat sales compared to the same period last year, at 0.2 per cent growth. Ontario posted a modest 0.3 per cent decline, while British Columbia saw sales fall 1.7 per cent year-over-year, though the province recorded the best payment time result nationally, with invoices settled in an average of 25.7 days — an improvement from 26.9 days in the first quarter.
"Canadian small businesses are likely to face continued economic uncertainty through the rest of 2026, with many business owners navigating ongoing cost pressures and cautious consumer spending," said Ashalee Mohamed, country manager for Canada at Xero, based in Toronto. "While some sectors may benefit from broader market trends, many small businesses will continue to focus on protecting cash flow, managing expenses and adapting to changing customer demand."
