Monthly estimates of business openings and closures, February 2023
Released: 2023-05-29
The business opening rate dropped from 4.6% in January to 4.4% in February, 0.3 percentage points below its 2015-to-2019 historical average. Following three consecutive months of decline in April 2023, the business closure rate increased by 0.2 percentage points to settle at 4.5%, slightly below its historical average of 4.6%. As closures were higher than openings, the number of active businesses dropped by 0.2% (-1,452).
The decline in the business opening rate in February was mainly driven by the reopening rate, which dropped from 2.9% in January to 2.7% in February. The entry rate held steady at 1.7% for the fourth consecutive month. Both the reopening (-0.2 percentage points) and the entry (-0.1 percentage points) rates were below their respective historical averages. In fact, both the reopening and the entry rates have been relatively stable since August 2021, generally varying around 0.1 percentage points of their historical averages.
In February 2023, the business opening rate decreased in all industries. The decline was led by other services (except public administration) (-0.9 percentage points change in the opening rate; -665 change in business openings) and transportation and warehousing (-1.1 percentage points; -627), followed by professional, scientific and technical services (-0.4 percentage points; -500) and health care and social assistance (-0.5 percentage points; -455).
In February, the increase in the business closure rate was widespread across industries. Transportation and warehousing (+1.1 percentage points change in closure rate; +497 change in business closures) and professional, scientific and technical services (+0.3 percentage points; +312) drove the decline. Construction (+0.1 percentage points; +160) and arts, entertainment and recreation (+0.7 percentage points; +102) were other industries with over 100 more business closures compared with January 2023.
The series on temporary business closures and exits (or "permanent closures") is now updated to include data up to August 2022. The exit rate edged down from 2.0% in July to settle at 1.9% in August. The business sector exit rate was 0.2 percentage points above its historical average. The exit rate held steady or changed little in all industries.
The exit rate generally settled at a higher level in 2022 compared with previous years. Indeed, between January and August, the average exit rate was 1.9%. This is 0.1 percentage points above the average exit rate for 2020 despite the COVID-19 pandemic, and 0.4 percentage points higher than the average exit rate for 2021. Furthermore, in July 2022 (2.0%), the exit rate posted its highest level since May 2020 (2.1%). As mentioned in the release published in March 2023, several events that happened in 2022 could have impacted businesses in a number of ways.
Industries where exit rates increased the most from their historical averages were transportation and warehousing (2.3% exit rate vs. 1.5% historical average), real estate and rental and leasing (2.4% vs. 1.9%) and professional, scientific and technical services (2.0% vs. 1.7%). Forestry, fishing and hunting (1.3% exit rate; 1.6% historical average) was the industry where the exit rate decreased the most from its historical average. In all other industries, exit rates were within 0.2 percentage points of their historical averages.
Chart 1
Monthly business openings and closures as a percentage of active businesses, business sector, January 2021 to February 2023, seasonally adjusted series
Chart 2
Percentage point difference in the business opening and closure rates from January to February 2023, by industry, seasonally adjusted series
Chart 3
Monthly exits as a percentage of active businesses, by industry, Canada, August 2022, seasonally adjusted series
Note to readers
The June 2022 and subsequent geographic locations are based on the 2021 Census of Population geography.
April 2022's release introduced a new process for seasonal adjustment in the presence of the outliers generated by the response to the COVID-19 pandemic. The new process has a greater number of outliers that are explicitly recognized at the outset of the seasonal adjustment process. This leads to a greater number of outliers being taken into account than was previously occurring. Examinations of seasonally adjusted data using the new process show results that are more stable over time and produce smaller revisions.
Every new month of data leads to a revision of the previously released data due to such factors as the seasonal adjustment process and a new version of the Generic Survey Universe File (or vintage of the Business Register). As such, the estimates may vary compared with a previous release.
Openings are defined as businesses with employment in the current month and no employment in the previous month, while closures are defined as businesses that had employment in the previous month but no employment in the current month. Continuing businesses are those that have employees in both months, and the active population in any given month is the number of opening and continuing businesses in that month. Reopening businesses are defined as opening businesses that were also active in a previous month (that is, they closed in a given month and had positive employment in a subsequent month). In contrast, entrants are opening businesses that were not active in a previous month.
The definition of exits is based on the Longitudinal Employment Analysis Program (LEAP) annual exits. Because the LEAP definition can require up to 24 months of data for a business to be counted as an exit, projections of exits using predicted growth rates are implemented using a regression model of exits on closures of more than six months. As a result, there are no published exits in the last six months. A temporary business closure is the difference between closures and exits. For more information on temporary business closures and exits, see "Defining and measuring business exits using monthly data series on business openings and closures."
A business is defined as an enterprise operating in a particular geography and industry.
The vast majority of businesses operate in one industry and one location or geography. These businesses will be counted once at the national and provincial levels in the monthly estimates of openings and closures. For example, a retailer in Windsor, Ontario will be counted as an active business in the Ontario estimates and once in the national estimates.
Some businesses can have multiple operations, and they can be in different industries and geographies. Such businesses can be counted more than once in the monthly estimates of openings and closures because they are active in multiple industries or geographies. For example, if a retailer has operations in both Alberta and Ontario, it will be counted as an active business in both provinces, but only once at the national level because it represents only one active firm. Similarly, a firm with retail and wholesale operations will be counted in both industries when individual industries are examined. However, when the business sector is examined, the firm counts only once because at that level it represents one firm active in the business sector.
Contact information
For more information, or to enquire about the concepts, methods or data quality of this release, contact us (toll-free 1-800-263-1136; 514-283-8300; infostats@statcan.gc.ca) or Media Relations (statcan.mediahotline-ligneinfomedias.statcan@statcan.gc.ca).
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