The Bank of Canada’s latest business outlook survey reveals a mixed picture for the third quarter of 2026. While overall business sentiment improved, concerns about rising costs and geopolitical tensions in the Middle East persisted. Notably, about three-quarters of the interviews were conducted before the collapse of Canada-U.S. trade talks in late August, which introduced new tariffs and counter-tariffs, weighing heavily on business outlooks.
The Bank of Canada highlighted that the new tariffs are increasing inflation expectations, dampening business sentiment, and putting upward pressure on costs and prices. Firms reported weaker export and investment prospects as a result. The survey, conducted from August 6 to September 2, also noted that while trade and geopolitical tensions had lessened, their lingering effects continued to impact sales outlooks.
Approximately half of the firms surveyed plan to pass on some or all cost increases to customers, citing improved demand and efforts to recover past margin compression. However, competitive pressures are limiting price increases for many companies. Business investment intentions have eased slightly but remain robust, supported by improving demand conditions.
In a separate consumer expectations report, long-term inflation expectations matched short-term expectations, and consumers reported better financial health than in the previous quarter. However, high prices and economic uncertainty continue to weigh on Canadians. These reports come ahead of the Bank of Canada’s next interest rate decision and monetary policy report, scheduled for October 28, 2026.