Companies report weak sales growth as tariff tensions weigh on outlook
Canadian business sentiment remains subdued but has risen slightly from its 2025 low, according to the Bank of Canada’s Business Outlook Survey released Monday.
The survey, conducted through in-person, video, and phone interviews from November 6 to 26, 2025, found firms reported weak sales growth over the past year, largely reflecting the economic impact of trade tensions with the United States.
“Trade-related uncertainty and the broad economic effects of tariffs continue to weigh on the outlooks of many firms,” the survey stated.
One-third of businesses reported a decline in sales volumes over the past 12 months, above the historical average of about one-quarter.
Export challenges continue
While firms anticipate modest improvement, export sales growth faces obstacles. Most exporters said their goods comply with the Canada-United States-Mexico Agreement and are exempt from tariffs, but soft US demand and trade policy uncertainty have restrained sales.
A small but growing share of exporters reported increased sales to non-US markets in response to trade tensions. However, most firms have not diversified due to barriers such as equipment costs and regulatory requirements.
Investment and hiring cautious
Investment intentions edged up slightly, approaching long-term averages, though spending focused on routine maintenance rather than expansion. In the oil sector, investment is expected to decline in 2026 due to low prices.
The share of businesses planning workforce reductions rose to its highest level since 2016. Most firms reported sufficient physical capacity and labour for soft demand, with labour shortages and capacity constraints below historical averages.
Price pressures ease
Fewer firms than last quarter expected significant increases in input and selling prices, with both measures near their lowest levels since 2016. Tariff-related cost pressures have decreased but remain present.
“The pass-through of tariff-related costs is no longer putting upward pressure on firms’ pricing decisions,” the survey found. Wage growth expectations stabilized after trending downward over the past few years.
Inflation expectations steady
Firms’ inflation expectations remained roughly stable between 2.5% and 3% across all time horizons. One-year expectations continued to fluctuate around 3%.
The share of firms planning or budgeting for a recession in Canada over the next 12 months eased from 33% to 22%, the lowest level reported in 2025.
The survey included about 100 firms selected to reflect the composition of Canada’s business sector GDP, along with results from the monthly Business Leaders’ Pulse survey and special consultations with oil and gas sector leaders.
