MortgageAbs

With a third of Canadian businesses now expecting a recession in the next 12 months—up from just 15% in the last two quarters—economic unease is clearly on the rise.

That’s one of the clearest signals from the Bank of Canada’s latest surveys, which show both business and consumer confidence weakening sharply.

The Q1 Business Outlook Survey (BOS) and Canadian Survey of Consumer Expectations, released Monday, paint a picture of growing uncertainty. Business sentiment fell to its lowest level in years, consumers are more worried about job security, and inflation expectations—after steadily easing—have started creeping back up.

And these surveys were conducted before the latest wave of U.S. tariffs hit.

The BOS indicator fell to -2.14 in Q1, down from -1.16 last quarter, marking the first decline in three quarters and the lowest reading since the early months of the pandemic. One in three businesses now expect a recession in the next 12 months, up from 15% in previous quarters.

Much of this unease is tied to trade tensions. RBC notes that even before the latest round of U.S. tariffs on steel, aluminum and border goods, businesses were already growing concerned.

The Bank’s survey was conducted before those measures were announced, which means confidence may have dropped further since.

What’s especially concerning is how quickly businesses are pulling back. Investment plans, which had been rebounding in late 2024, are now being paused or scaled back.

Hiring intentions have also plunged to a nine-year low. And the outlook for sales—especially among exporters—has dimmed, with many citing uncertainty around consumer demand and global supply chain risks.

The pressure on costs is also building, with about two-thirds of businesses saying they expect higher input costs due to tariffs, and most plan to raise their selling prices within six months.

That’s driving short-term inflation expectations higher, even as firms remain cautious on wages. Long-run inflation expectations remain stable—for now.