With the start of the year marked by the tariff war, the economic prospects of Canadian consumers and businesses seem less dark than in the first quarter. However, the foot remains on the brake before economic uncertainty.
Two surveys published on Monday by the Bank of Canada (BDC) point to less alarmist expectations on the future of the Canadian economy. A third of companies surveyed still expect an increase in customs duties costs, a significant drop compared to two -thirds for the first quarter.
On the side of people working in sectors sensitive to trade, concern about employment safety is reduced, going from 60 % to 46 %. The majority of companies (60 %) intend to keep a stable number of employees, 10 % think they are reducing their workforce.
In terms of inflation, expectations are similar to businesses and consumers, it will continue to increase, but less drastically than expected at the start of the year. Companies remain below 3 % in the next year, in the target range of Canada Bank. Canadian families expect inflation close to 4 %.
Questioned about the future of the Canadian economy, almost two -thirds (64 %) of Quebecers responded to a recession. A proportion slightly lower in the first quarter (69 %), but much higher than in the third quarter of 2024 (41 %).
Pessimism always in force
Despite the slight decline in economic pessimism, trade war remains the main concern of Canadians.
Beyond 9 % during the inflationary outbreak after the pandemic, expectations to increase the price of rents, food, gasoline and car cars had ended up almost half, but have returned to almost 10 % in the case of cars since the last quarter.
Canadian households will therefore pay attention to their portfolio according to the consumer expenditure index. The latter, which measures consumer purchase intentions, has been calculated downwards in the survey. To do this, it takes into account the reduction of expenses for inflation and interest rates as well as the increase in daily expenses.
Faced with economic uncertainty, 36 % of respondents said they wanted to limit their purchases or postpone certain expenses. This low purchase intention is also felt among companies whose indicators of future sales are generally down.
Companies claim to undergo increased pressure to increase sales prices due to customs duties. However, the survey maintains that low demand limits this price increase, encouraging companies (69 %) to reduce their profit margin to absorb increasing costs.
Local purchase
Certainly, the latest data provided by the BDC confirm the desire of Canadians to buy local and sulk American products. An effort however limited by the increase in the cost of living.
More than half of the respondents said they wanted to spend less in American or travel products in the United States and more in Canadian products. According to the survey, Canadians are ready to “pay for a maximum of 10 % more for goods made in Canada”.
A patriotic spirit that is felt in consumer concerns. According to respondents, the main obstacle will be confronted by the Bank of Canada in achieving its 2 % inflation target is the tariff war. An obstacle named by almost a third of Canadians surveyed.
Coming decision
These surveys are not trivial since they come out shortly before the announcement of the next Master rate of the Bank of Canada which will take place on July 30. The institution is based on the pulse of businesses and consumers, among other things, to make a decision during this period of uncertainty. After seven consecutive drops which reduced its main monetary intervention tool from 5 % to 2.75 %, the Bank of Canada has left its key rate unchanged since March 2025.
Faced with the release of the report, an analyst from the Royal Bank of Canada, Claire Fan, called on the Banque du Canada to offer government assistance to affected companies before reducing the key rate. She estimated in a press release that the BDC “will maintain the current rates”. The economist Katherine Judge of the CIBC added to expect a drop in the key rate in September.
Different financial institutions reacted to the publication of surveys, recalling that the surveys in May was before recent threats of prices of 35 % by the United States. A less tense moment in terms of trade.
The National Bank has also remained pessimistic before the future of the Canadian economy. “Make no mistake: an improvement does not necessarily mean good prospects,” she said in a statement.