The Bank of Canada released the results of its third-quarter 2025 Business Outlook Survey, indicating that Canadian firms continue to face subdued outlooks and intentions despite a gradual improvement in sentiment. The survey, conducted from August 7 to September 3, included interviews with senior management from about 100 firms and incorporated input from monthly online surveys of business leaders as well as consultations with trade-sensitive sectors.
According to the report, expectations for growth in both domestic and export sales remain weak. Many businesses cite ongoing concerns about the economic effects of trade tensions as a key factor holding back demand. "Firms’ outlooks and intentions remain subdued despite a gradual improvement in sentiment and a slight easing of perceived uncertainty," the Bank stated.
A growing number of companies are preparing for a possible recession by tightening budgets or pausing investments; the share planning for such scenarios has risen slightly from 28% to 33%. This level remains higher than what was seen in 2024, reflecting persistent concerns over trade-related risks.
Capacity constraints and labour shortages appear less problematic this quarter. Few firms reported significant difficulties meeting demand or finding workers, with labour shortage reports at their lowest since 2020. As a result, most businesses do not expect to increase staffing levels in the coming year.
Investment plans also remain muted. Close to half of surveyed firms are prioritizing routine maintenance over expansion projects due to soft demand and uncertainty related to tariffs and international trade frictions. In particular, companies affected by U.S. tariffs on steel and aluminum products reported especially weak investment outlooks, noting that redirecting exports—such as sending primary aluminum to Europe—is viewed as an unsustainable long-term solution.
Businesses continue to anticipate rising costs driven by tariffs and trade uncertainty but say weak demand is limiting their ability to pass these increases on through higher selling prices. Wage growth expectations have slowed further compared with previous quarters, trending near pre-pandemic levels.
One-year-ahead inflation expectations among respondents now sit around 3%, down from earlier peaks during the height of recent trade conflicts but still slightly above late-2024 levels. Tariffs remain the main driver behind these inflation forecasts, though many businesses expect soft demand will offset some upward pressure on prices.
Survey results reflect only the opinions expressed by participating firms' management teams and do not necessarily represent official views held by the Bank of Canada itself.
More detailed data and charts related to this survey can be found on the Bank’s website.