Canada business sentiment weakened in the second quarter after three quarters of improvement, as higher fuel-related costs and uncertainty connected to the Middle East weighed on firms’ outlooks, the Bank of Canada said in its latest Business Outlook Survey.
How Canada Business Sentiment Is Shaping Investment and Hiring Plans
The survey, based on interviews conducted from May 1 through May 21, found that expectations for sales had softened. The share of companies making recession plans for the coming year rose to 17% from 9% in the first quarter, though it remained below levels reported during 2025.
The central bank’s new activity indicator declined, while its price indicator increased. Companies reported that cost pressures, especially from fuel, freight and petroleum-derived materials, were pushing up anticipated input and selling prices. The survey said many firms were absorbing some or all of those increases because of weak demand, competition or contractual constraints.
Conditions differed sharply by region. Businesses in the Prairie provinces, particularly those connected to oil, reported stronger expectations for sales, capital spending and hiring as commodity prices supported activity. Elsewhere in Canada, firms cited weaker demand and the effect of higher fuel costs on households and businesses.
Export expectations improved to well above their historical average, according to the survey. Firms reported less hesitation from U.S. customers over trade-policy uncertainty, stronger commodity demand and new demand tied to U.S. artificial-intelligence data-center construction.
Investment intentions remained elevated, supported in part by productivity projects, equipment upgrades and artificial-intelligence adoption. Hiring plans, however, slipped below their historical average. Most respondents said they retained sufficient labor and physical capacity, even as reports of supply-chain difficulties increased.
