CA: BoC Business Outlook Survey

Highlights

Business sentiment improved before the breakdown of Canada-U.S. trade talks, with the third quarter 2026 Business Outlook Survey (BOS) index at minus 0.33, up from minus 0.38 in the second quarter, based on interviews conducted by the Bank of Canada between August 6 and September 2.

Outlooks improved for sales at home and abroad as the drag from geopolitical uncertainty and trade tensions subsided at the time of the survey. Also supporting the outlook were high oil prices and solid demand from the U.S., Canada's main trading partner despite diversification efforts.

Despite the improvement, employment intentions are"soft" and wage growth is expected to remain unchanged over the next 12 months. Investment intentions, while robust,"eased slightly".

On the inflation front, expectations for selling and input price increases"moderated", the report said. Still, expectations remained high and"firms facing larger-than-normal cost increases plan to continue passing them on to customers". Several firms cited improved demand and the need to make up for past margin compression.

Overall, inflation expectations eased.

Evidence collected after the breakdown of trade negotiations with the U.S. indicates these developments are weighing on firms' outlooks."Inflation expectations have risen alongside the new tariffs and the recent rebound in energy prices" the report said."The tariffs are also dampening business sentiment, weakening outlooks for exports and investment, and putting upward pressure on costs and prices."

The sister Canadian Survey of Consumer Expectations shows that"consumers’ long-term inflation expectations rose to match elevated shorter-term expectations". Inflation expectations at all horizons increased following the breakdown of trade talks.

Consumers reported weaker spending plans as a result, also citing economic uncertainty.

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