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Investing.com -- Canadian businesses reported slightly improved conditions in the third quarter but remain hesitant to increase investments or hiring due to ongoing U.S. tariff pressures, according to a Bank of Canada survey released Monday.
The central bank’s business outlook indicator rose marginally to -2.28 in the third quarter from -2.40 in the previous quarter, showing sentiment has improved from early 2025 lows but remains moderate.
The survey, conducted between August 7 and September 3, revealed that firms do not anticipate stronger sales growth in the coming year as tariffs continue to hamper demand. The balance of opinion on indicators of future sales reached 0, up from -6 in the second quarter.
Trade tensions continue to weigh heavily on business outlooks, with 27% of firms reporting an outright decline in sales over the previous 12 months, up from 24% in the second quarter.
The percentage of businesses expecting Canada to enter a recession in the next year increased to 33% from 28% in the previous quarter. The BoC noted that recession concerns were primarily responsible for offsetting improvements in overall business sentiment.
Many companies are putting new investments on hold and not allocating additional capital for building capacity, the survey found. Hiring intentions also remain subdued, with 35% of firms expecting lower labor costs over the next 12 months, while only 14% anticipate higher labor costs.
On the inflation front, 18% of businesses expect inflation to exceed 3% over the next two years, down from 23% in the second quarter.
A separate BoC consumer survey showed 64.1% of Canadians expect a recession within the next 12 months, slightly down from 64.4% in the second quarter. However, consumer expectations for 5-year inflation rose to 3.67% from 3.45%.