The Bank of Canada (BoC) released its Business Outlook Survey for the first quarter on Monday. The survey looks at the outlook for the business environment from both the consumer and business viewpoint. This quarter’s survey found sentiment is dropping amid the extensive tariffs from the US, which are expected to negatively impact economic growth in Canada and around the world. This reinforces the results of other measures of consumer and business confidence in recent weeks. Lower confidence might hinder spending and investment decisions.

• Trade tensions with the US are creating uncertainty among the business community. Almost a third of firms believe the Canadian economy will enter a recession this year. Businesses believe tariffs will drag down business activity and hurt operations. Prices are likely to pick up in response to the tariffs, according to the survey.
• Compared to the previous quarter, fewer firms see sales improving this year. Amid the uncertainty, businesses are likely to put hiring on hold, while capital expenditures might be halted.
• Consumers are showing concern about their job security. A pullback in economic activity could result in job losses. The Canadian economy lost 32,000 jobs in March.
• A higher number of Canadian consumers might pull back on spending. Consumer spending was a key driver of growth in the fourth quarter of 2024, boosted by lower interest rates and falling inflation. However, lower confidence and concerns about job security might have Canadians tightening their spending.

The BoC’s survey shows consumers and businesses have a deep concern about the outlook for Canada’s economy amid US tariffs. The BoC makes its next interest-rate decision on April 16. Markets seem to be split on whether the BoC will hold steady or lower rates again to help support the economy amid the tariffs. Canadian equity markets declined for a fourth straight day.

If you would like to discuss this economic and market update or have questions about your finances and investments, please feel free to contact me anytime.