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CA: BoC Business Outlook Survey
| Actual | Previous | Revised | |
| Business Outlook Indicator | -0.39 | -0.36 | -0.35 |
Highlights
Business sentiment deteriorated after three quarters of improvement, with the second quarter 2026 Business Outlook Survey (BOS) index at minus 0.39, down from minus 0.35 in the first quarter based on interviews conducted by the Bank of Canada between May 1 and 21.
Given that the first quarter survey occurred before the war in the Middle East, this survey reflects a deteriorating geopolitical environment that led to higher costs of energy and other commodities, and in turn slower business and consumer spending. The sales outlook softened as a result and firms are still reporting spare capacity.
Still, the export outlook improved as fewer firms cited trade uncertainty and hesitancy among U.S. customers as a drag, while reporting stronger demand for commodities.
The sister Canadian Survey of Consumer Expectations conducted from May 22 to 27 confirmed the negative impact of concerns over high prices on consumer spending plans, especially among those expecting the war in the Middle East to"significantly raise inflation".
Two new BOS indicators - representing activity and price outlooks - diverged: higher oil prices put upward pressure on the price outlook, while putting downward pressure on prospects for activity among firms outside of the Prairies. This finding confirms the conundrum the Bank of Canada faces.
On the inflation front, the share of firms expecting higher input and selling prices"rose markedly". The price outlook index is at 0.96, the highest since the second quarter 2023. That being said, inflation expectations have declined since an interim agreement was signed between the U.S. and Iran in Mid-June to end the war.
In fact, the share of firms expecting inflation to be above 3 percent over the next two years declined to 11 percent from 16 percent the previous quarter.
Consumers' one-year ahead inflation expectations are now above 4 percent, with trade tensions being the top driver, followed by oil and energy.
The BOS survey also found that investment intentions are stable and"strong", especially for oil producers.
By contrast, firms’ employment intentions eased"slightly" and are now below the long-term average. That being said, higher commodity prices is supporting hiring intentions for firms in the Prairies.
Consumers' perceptions of labor market conditions, however, have improved, albeit modestly, due to de decline in the perceived risk of losing their job.