Key insights
- Canadian business sentiment improved in Q1 2026, with fewer firms expecting a recession. Investment intentions are up, and hiring plans are near historical averages. However, post-survey follow-ups indicate rising input costs due to the Middle East war, potentially impacting future outlooks. The Bank of Canada's survey results may influence future monetary policy decisions, indirectly affecting US markets through trade and economic linkages.
Investing.com - Business sentiment in Canada improved slightly in the first quarter of 2026 to levels similar to those before the trade conflict with the United States began, according to a Bank of Canada survey released Monday.
The Business Outlook Survey was conducted from February 5 to 25, before the war in the Middle East started. The share of firms planning or budgeting for a recession in Canada over the next 12 months declined to 9% from 22%, the lowest level since the series began in 2023. Fewer firms than last quarter reported that trade tensions are impacting their sales outlook, while more said public spending is supporting sales.
Investment intentions improved for the second consecutive quarter, with the balance of opinion now well above its long-term average. Nearly half of firms anticipate hiring more staff over the next 12 months, with the share planning to hire now near its historical average. All the improvement in investment intentions came from firms that indicated their investment planning is not affected by trade tensions.
Firms surveyed before the war expect growth in their input prices and selling prices to be stable over the next 12 months. Businesses on average anticipate wage growth of around 3.5% and expect wages will grow at a slower pace than they did over the past 12 months. Firms’ one-year-ahead inflation expectations ticked up slightly, driven by views of those surveyed in March after the outbreak of war, though expectations at all horizons remain below the peak reached during the height of the trade conflict in early 2025.
Follow-up calls conducted between March 18 and 27 suggest many firms are already facing higher input costs due to rising prices for energy, fertilizer and freight linked to the war in the Middle East. Most firms’ outlooks for sales, investment and employment are roughly unchanged, the central bank said.
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