BoC outlook survey highlights deteriorating trade expectations on tariff fears

The Bank of Canada's (BoC) Business Outlook Survey for the first quarter has shown that overlook economic activity expectations are contracting sharply as the United States (US) seeks to spark a global trade war across the board. According to the BoC, firms are overwhelmingly set to begin increasing prices in an effort to overcome steep import taxes being imposed by the Trump administration.

Key highlights

• Q1 BoC survey shows overall sentiment has deteriorated, uncertainty remains widespread.
• Business survey indicator has declined to -2.14 from -1.16 in Q4 2024.
• 32% of Canadian firms expect Canada to be in a recession in 12 months' time, up from 15% in Q4.
• 65% of firms believe costs will be pushed higher; 35% of firms expect to directly increase selling prices.
• Fewer businesses expect sales increases over the next year.
• 23% of firms expect inflation to remain above 3% for the next two years.
• 28% of firms have reported direct decline in outright sales over the past year.
• 66.5% of Canadians expect a recession in the next 12 months.
• Consumers expect 5-year inflation to rise to 3.39% versus 2.99% last.
• Survey results were collected from February 2 to February 26, does not include latest Trump tariff announcement from April 2.