BoC survey: 28% of companies expect Canada to be in a recession over the next year, down from 32% in Q1.

BoC survey: 28% of companies expect Canada to be in a recession over the next year, down from 32% in Q1.

The latest Business Outlook Survey by the Bank of Canada (BoC) offers insights into the economic outlooks of Canadian businesses, with notable shifts in sentiment and expectations. Conducted from May 8 to 28, 2025, the survey revealed that 28% of companies expect Canada to be in a recession over the next year, a decrease from the 32% recorded in the first quarter of 2025 [1].

Tariffs and related uncertainty continue to have significant impacts on businesses' outlooks. While the worst-case scenarios that firms envisioned last quarter are now seen as less likely, sales outlooks remain pessimistic overall due to widespread concerns about the broader effects of a slowing economy. However, recent monthly survey results suggest some improvement in firms’ outlooks, particularly among exporters, as few have been directly affected by the current tariffs [1].

Uncertainty remains a significant concern, driving cautiousness in outlooks for hiring and investment. Most firms expect to maintain current staffing levels and limit investment to regular maintenance over the next 12 months. Cost increases due to tariffs and trade uncertainty have materialized for some firms, but expectations for future impacts have eased. Firms have moderated their expectations for negative impacts, with around two-thirds expecting higher tariff-related costs last quarter compared to only one-third this quarter [1].

Business sentiment has improved from the sharp declines recorded in March and April 2025. The share of firms planning for a recession in Canada has declined slightly, from 32% to 28%, reflecting ongoing concerns about trade tensions. However, uncertainty around financial, economic, and political conditions remains the top concern for firms [1].

Near-term sales expectations weakened in the second quarter of 2025, driven by broad spillover effects from the trade conflict, such as weak spending on services and capital goods by business customers. Despite this, outlooks for export sales have improved among businesses strongly affected by trade tensions. Plans to expand capacity are still on hold, with firms focusing their investments on routine maintenance rather than expanding capacity or improving productivity [1].

Firms’ expectations for wage growth over the coming year continue to trend lower, with the average expected wage increase now near its pre-pandemic average. Cost pressures from trade tensions remain widespread, with firms expecting input price growth to accelerate over the next 12 months. These pressures are moderate, with many firms expecting only slight increases in their input prices [1].

In summary, the latest Business Outlook Survey by the Bank of Canada indicates that while recession concerns have eased, uncertainty persists. Businesses remain cautious in their outlooks for hiring and investment, and cost pressures from tariffs continue to weigh on firms' expectations. The survey provides valuable insights into the economic conditions facing Canadian businesses and the potential impacts on the broader economy.

References:
[1] https://www.bankofcanada.ca/2025/07/business-outlook-survey-second-quarter-of-2025/