(Bloomberg) -- The Bank of Canada’s survey of businesses painted a picture of an economy that’s close to finding its footing before facing US President Donald Trump’s trade policies that may potentially destabilize it.
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The central bank’s business outlook indicator rose to minus 1.2 in the final quarter, from minus 2.3 previously. That’s the third straight quarterly improvement, and it’s now at the highest level since early 2023. There are signs of “emerging optimism” and activity shows “tangible improvements,” driven by lower interest rates and slower inflation, the bank said in a report on Monday.
Firms are beginning to anticipate improvements in sales activity and expect their sales growth to improve over the coming year. Intentions to increase investment have also become more widespread among businesses, with some resuming plans that were postponed as financing costs are lower and demand outlooks improving, the survey showed.
However, Trump’s election prompted some firms to expect higher input costs and selling prices, as well as lower capital expenditures, employment and domestic and export sales. That’s even as the business survey — conducted from Nov. 7 to 27 — may not have captured full extent of Trump’s 25% tariff threat against Canada and Mexico, which was made on Nov. 25.
Trump will not unveil tariffs immediately after his inauguration Monday, but will call for federal agencies to study tariff policies and the US’s trade relationship with Canada, Mexico and China, people familiar with the matter told Bloomberg News, confirming a report in the Wall Street Journal.
A separate consumer survey’s follow-up phone interviews, on the other hand, were done on or after Trump floated the idea in a Truth Social post. Many Canadians see economic uncertainty, and high prices for housing as well as many goods and services, continuing to weigh on spending decisions. Still, for the first time since 2021, consumers said they expect their spending to increase faster than they expect prices to rise.
Nearly half of consumers said they expect a recession in the coming year. Only 15% of firms are planning for a recession. Moreover, 58% of consumers remain uncertain about where the economy is heading. The bank said the survey results show that the “sources of this uncertainty have shifted from interest rates and government policies to global tensions, including from the new US administration.”