The Bank of Canada published its first-quarter 2025 Business Outlook Survey, alongside Business Leaders’ Pulse results and insights from Governing Council outreach and consultations with trade-sensitive sectors. The update shows business sentiment deteriorating sharply and uncertainty becoming widespread amid sudden and unpredictable shifts in United States trade policy, with firms delaying key decisions on investment and hiring despite reporting sufficient capacity to meet expected demand. The BOS indicator reversed its recent upward trend and remains below average, driven mainly by weaker balances of opinion on employment, investment and measures of future sales, partly offset by higher expectations for input cost increases linked to tariffs. Uncertainty rose to firms’ top concern, with 32% now planning on the assumption that a recession will occur in Canada over the coming year, up from 15% in the previous two quarters, and exporters reporting particularly weak outlooks. Around 40% of firms expect lower sales growth if tariffs are implemented; investment intentions and hiring plans weakened markedly, while labour shortages and binding capacity constraints fell to low levels. On prices, firms no longer expect input price growth to slow, with two-thirds saying their non-labour input costs would be affected by tariffs and many indicating they would raise selling prices, often within six months; near-term inflation expectations increased again, while longer-term inflation expectations were largely unchanged. The BOS was conducted through interviews from February 6 to 26, 2025, and the Business Leaders’ Pulse results referenced cover January to March 2025.
Bank of Canada 2025-04-07
Bank of Canada survey shows Q1 2025 business sentiment worsening as tariff uncertainty lifts cost and inflation expectations
The Bank of Canada's first-quarter 2025 Business Outlook Survey reveals a sharp deterioration in business sentiment and widespread uncertainty due to unpredictable U.S. trade policy shifts. Firms are delaying investment and hiring decisions, with 32% anticipating a recession in Canada within a year. Input cost expectations have risen, with many firms planning to increase selling prices, while near-term inflation expectations have also increased.