The Bank of Canada published its first-quarter 2026 Business Outlook Survey, indicating business sentiment improved slightly and firms’ expectations for sales growth, investment and hiring strengthened, with most price and wage plans pointing to “average-sized” increases over the next year. While the core survey evidence was gathered before the war in the Middle East began, follow-up calls with more exposed firms suggest input cost pressures have already risen and have nudged up one-year-ahead inflation expectations. Business sentiment returned to levels similar to those seen before the trade conflict with the United States began, and the share of firms planning or budgeting for a recession over the next 12 months fell to 9% from 22%, the lowest since the series started in 2023. Fewer firms reported trade tensions affecting their sales outlook or input prices, while more pointed to public spending, particularly infrastructure and defence projects, as supporting demand; investment intentions moved well above their long-term average and nearly half of firms expected to add staff, although most planned increases were small. Firms expected wage growth of around 3.5% and, prior to the war, broadly stable input and selling price growth over the next 12 months; after the war’s onset, targeted follow-up calls (20 firms) and industry consultations highlighted higher costs for energy, fertilizer and freight, with many firms reporting limited ability to pass these through due to weak demand, competition and contract constraints. The release notes that the first joint review of the Canada-United States-Mexico Agreement will begin on July 1, 2026, but few firms cited it as shaping near-term plans, even as most expected negotiations to imply higher average tariff rates and some reported suppliers already pricing in anticipated tariff increases.
Bank of Canada 2026-04-20
Bank of Canada Business Outlook Survey shows improving sentiment and stronger investment and hiring plans alongside war-linked input cost pressures
The Bank of Canada’s first-quarter 2026 Business Outlook Survey reports modestly improved business sentiment, stronger expectations for sales, investment and hiring, and wage growth around 3.5%, with most firms planning “average-sized” price and wage increases. While core responses predate the Middle East war, follow-up contacts with more exposed firms indicate higher input cost pressures—especially for energy, fertilizer and freight—and slightly higher one-year-ahead inflation expectations amid limited pricing power. Few firms said the upcoming Canada-United States-Mexico Agreement joint review is affecting near-term plans.