Bank of Canada | Confidence shaken among companies and consumers

Two reports from the Bank of Canada said on Monday that uncertainty linked to customs duties continued to weigh on the confidence of businesses. Moreover, consumers in the second quarter, but that the worst anticipated commercial scenarios seem less likely.

Posted at 11:52 a.m. Updated at 12:39 p.m.

The Central Bank survey on business prospects stresses that companies’ confidence is “still moderate”. Consequently, but that it has improved compared to the strong decreases bank canada | confidence shaken recorded in March and April 2025.

Thus. Moreover, 28 % of companies are now preparing for a recession in Canada, compared to 32 % in the previous quarter, but still up compared to the 15 % of the two previous quarters, we can read.

“Customs duties and trade tensions continue to weigh on the prospects of many companies. Consequently, In some cases. In addition, the negative effects on costs and sales provided by most companies in the previous quarter have materialized, and those affected expect that these effects persist, “specifies the report.

“At the same time, companies have moderated their expectations in terms of negative repercussions. For example, »»

According to the report. Similarly, a third of companies expected an increase in costs related to customs duties this quarter, against bank canada | confidence shaken about two -thirds in the last quarter.

“Nevertheless, uncertainty surrounding the financial, economic and political conditions remains the main concern of businesses,” read.

“The concerns about the direct impact on customs duties on Canadian companies have slightly reduced. but new concerns have emerged as to the more general repercussions of customs duties on the global economy and on demand in Canada. »»

The report stresses that uncertainty continues to curb companies in their new investment projects. which continues to manage their finances in a prudent manner.

The prospects for sales remain generally pessimistic due to generalized concerns concerning the effects of economic slowdown. but the report specifies that the recent monthly surveys suggest a certain improvement in the perspectives of companies.

This is particularly the bank canada | confidence shaken case for exporters, because few of them have been directly affected by current customs duties. However. exporters currently subject to American sectoral customs duties, such as steel and aluminum manufacturers as well as companies in the automotive sector, continue to report gloomy perspectives.

The weakness of short -term sales forecasts is largely attributable to the “vast repercussions of the trade conflict. ” said the report.

Bank canada | confidence shaken

Downward expenditure intentions

In addition. the survey on consumers’ expectations indicates that spending intentions have further decreased due to the persistent threats of customs duties.

Consumers also continue to perceive the labor market as sluggish, in a context of fears increased by job losses.

“The trade conflict pushes consumers to be more. more cautious about their spending bank canada | confidence shaken projects and to change their consumption habits,” said the consumer expectations of consumers in Canada, adding that many respondents said they wanted to favor Canada and the purchase of Canadian products.

Consumers’ short -term inflation expectations have hardly changed since their high rise in the first quarter of the year.

“Consumers expect high increases in motor vehicles in the next 12 months. but their expectations relating to the growth in essential goods and services have decreased this quarter,” read.

“More respondents said that customs duties are the most important factor that affects the. capacity of the Banque du Canada to control inflation. »»

The investigation into business prospects was carried out between May 8. 28, while the consumer expectations were carried out between April 24 and May 15, with follow bank canada | confidence shaken -up telephone interviews between May 20 and 26.

Katherine Judge. an economist at CIBC, stresses that the time chosen means that the central bank has not taken into account the most recent threat of US President Donald Trump to impose a general customs right of 35 % on Canadian products.

The survey period also preceded the doubling of customs duties on steel and aluminum 50 % by the United States from June.

Although the compliance with the ACEUM limits the effect of a general customs right of 35 % on companies. it specifies that these remained “cautious in the face of increased commercial uncertainty”.

“Companies have indicated that their ability to pass on costs related to the increase in customs duties on consumers was limited by low demand. and many bank canada | confidence shaken companies absorb these costs in their margins,” said Mr.^me Judge in a note.

These reports precede the next decision of the Bank of Canada on interest rates. the publication of its report on monetary policy, scheduled for July 30.

The central bank maintained its key rate unchanged at 2.75 % in April and June.

Although these surveys “should not influence the decision on next week”. Royce Mendes, Managing Director and Head of Macroeconomic Strategy at Desjardins, says the Central Bank “adopts a conciliatory tone in its communications, which could revive anticipation of rates”.

“The concerns about the repercussions of customs duties. inflationary anticipations prompted the Bank of Canada to maintain its rates in June, but these factors seem less worrying in these surveys,” writes Mr. Mendes in a note.

“Even if central bankers should not soften their monetary policy next week. they have sufficient room for maneuver to resume their drop in the year if the economy continues to stagnate. »»