Canada Business Outlook Research Brief

Trade tensions dampened sentiment. The Business Outlook Survey Indicator declined in the first quarter as businesses began factoring U.S. tariffs into their operations. Firms expected softer sales growth, driven by a deterioration in export orders. Uncertainty stemming from trade tensions took a toll on investment, reducing firms’ future spending on machinery and equipment. Hiring intentions also nosedived, as the percentage of survey respondents planning to increase employment fell to a nine-year low. While these shifts in confidence reflect the impact of worsening trade relations, only 30 per cent of the firms surveyed had explicitly incorporated tariffs into their outlooks. Because the survey window coincided with the period when the U.S. paused the implementation of tariffs on Canada in February, most of the results likely do not reflect the current state of business sentiment.