Overall business sentiment remains subdued, but firms are beginning to anticipate improvements in sales activity. Meanwhile, businesses expect growth in costs to continue to ease and growth in selling prices to stabilize, reported the Bank of Canada on Monday with its latest Business Outlook Survey – Fourth Quarter of 2024.

Key findings from the survey include:

  • After a period of weak demand, firms expect their sales growth to improve over the coming year. This expectation is largely driven by recent interest rate reductions and the anticipation of further cuts ahead.
  • With lower financing costs and improving demand outlooks, intentions to increase investment have become more widespread among firms. Part of this is a resumption of previous plans that were postponed.
  • Most businesses reported having some spare capacity. Because of this, hiring plans remain modest. Binding labour shortages are not widespread, and most firms describe the availability of outside labour as improved compared with one year ago.
  • Growth in firms’ selling prices has stabilized, while growth in wages and other input costs continues to ease. Inflation expectations have moved up slightly in recent months but remain within the Bank of Canada’s target range.
  • Uncertainty about the effects of the new US administration is prevalent, with firms commonly anticipating higher input costs due to trade tensions.
The Bank said the following factors are weighing on sentiment: weak consumer spending and generally soft demand; uncertainty about economic conditions; and taxes and regulations.

“There are, however, signs of emerging optimism, with business activity showing tangible improvements from its low level. These improvements are driven by lower interest rates and lower inflation. In this context, only 15% of firms are planning for a recession in Canada over the coming year, unchanged from last quarter but down significantly from the 38% of firms that reported this 12 months ago,” it said.

Mario Toneguzzi

 Mario Toneguzzi is Managing Editor of Canada’s Podcast. He has more than 40 years of experience as a daily newspaper writer, columnist, and editor. He was named in 2021 and 2024 as one of the top business journalists in the world by PR News. He was also named by RETHINK to its global list of Top Retail Experts 2024 and 2025.

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