BoC Business Outlook Survey shows sentiment remains subdued, but recession fears continue to wane

The Bank of Canada's latest Business Outlook Survey, a quarterly summary of interviews to gauge the overall mood of business operators within the Canadian economy, has revealed much of what was already known by investors. The latest survey results were from the last quarter of 2025, and while companies remain overall lukewarm on the upcoming calendar year, expectations of a devastating recession have eased.

Key highlights

• Business sentiment is subdued but remains above the low recorded in the second quarter of 2025.
• Firms have reported that sales growth has been weak over the past year, largely due to the economic effects of trade tensions. However, they expect sales growth to improve slightly in the near future.
• Growth in export sales is anticipated to be modest, with a small but increasing number of businesses reporting higher sales to non-U.S. markets as a response to trade tensions with the United States.
• Most firms have not indicated any significant capacity constraints or labor shortages. Given that demand is expected to remain soft, the majority of businesses plan to either maintain or reduce their current staffing levels.
• Investment intentions have improved slightly, but firms are prioritizing spending on routine maintenance, partly due to ongoing trade-related uncertainty. In the oil sector, investment is expected to decline in 2026 as a result of low oil prices.
• Businesses reported fewer pressures from tariff-related cost increases compared to the previous quarter, although these pressures still exist. Most firms do not anticipate substantial increases in selling prices.
• Inflation expectations among firms remain stable, ranging between 2.5% and 3%.