Canadian consumers continue to struggle with high prices and economic uncertainty, while business confidence remains subdued, according to two new reports released by the Bank of Canada that assess economic sentiment in the final quarter of 2025.
The central bank’s Q4 Business Outlook Survey shows that while tariff-related cost pressures have eased slightly compared to the previous quarter, they remain widespread across sectors. Business leaders said uncertainty around financial conditions, global trade, and political developments continues to weigh heavily on decision-making.
“Businesses continue to cite uncertainty surrounding financial, economic and political conditions, slowing demand, and cost pressures as their most pressing concerns,” the report noted, adding that overall sentiment remains weak.
Over the past 12 months, many firms experienced sluggish sales growth. About one-third of surveyed businesses reported a decline in sales volumes, reflecting softer demand both domestically and internationally.
There were, however, modest signs of improvement. The survey found that 43 per cent of companies reported better forward-looking sales indicators compared to a year earlier, while 30 per cent said conditions had worsened. Despite this shift, the Bank of Canada cautioned that expectations remain below historical averages, pointing to only limited growth ahead.
“While businesses continue to report negative effects some coming directly from tariffs but even more coming indirectly from trade tensions they do not expect these effects to worsen further,” the report said.
On the household side, the Canadian Survey of Consumer Expectations painted a similarly cautious picture. Consumers said their spending plans remain constrained by persistently high prices, economic uncertainty, and housing costs. Many households remain hesitant to increase discretionary spending amid concerns about their financial outlook.
Views on international trade also influenced consumer sentiment. Respondents who believed the worst impacts of trade tensions were still to come expressed greater pessimism about their financial well-being over the next year.
The reports found that roughly the same share of businesses as in the previous quarter said they were strongly affected by U.S. trade policies. These firms reported weaker sales over the past year, citing not only direct tariff impacts but also broader spillover effects across the economy.
According to the central bank, these effects include delayed investment decisions, reduced orders from clients in tariff-affected industries, and weaker demand in consumer-driven sectors such as housing.
Despite ongoing challenges, fears of an imminent recession have eased somewhat. Only 22 per cent of businesses said they are planning for a recession in Canada over the next 12 months, down from 33 per cent in the previous survey.
The findings come just days before the Bank of Canada’s next interest rate decision and monetary policy report, scheduled for Jan. 28, which will be closely watched for signals on the central bank’s response to ongoing economic pressures.
The Business Outlook Survey is conducted quarterly through in-person, video, and phone interviews with business leaders across the country. The Canadian Survey of Consumer Expectations was carried out through an online panel between Oct. 30 and Nov. 18, 2025, followed by phone interviews from Nov. 21 to 27.
