Bank of Canada survey shows stronger business sentiment as trade risks cloud outlook

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Highlights

Bank of Canada Business Outlook Survey for Q3 2026 shows improved business sentiment, with most responses collected before Canada-U.S. trade talks collapsed.
Firms report stronger outlook for domestic and export sales, citing reduced Middle East geopolitical uncertainty, solid U.S. demand, and high oil prices driving export optimism.
Renewed trade tensions and new tariffs following the talks' breakdown are raising costs and inflation expectations, offsetting earlier gains in confidence and dampening future investment outlooks.

Third-quarter survey findings and trade timing

As reported by the Bank of Canada, the Business Outlook Survey was conducted through in-person, video and phone interviews from August 6 to September 2, 2026, with about three-quarters of responses collected before trade talks between Canada and the United States broke down and new Canadian counter-tariffs were announced.

The central bank says overall business sentiment improves in the third quarter after deteriorating in the previous quarter. Firms report better outlooks for domestic sales and export sales, while investment intentions remain robust.

At the time of the survey, the improvement is driven largely by a reduced drag from trade tensions and geopolitical uncertainty in the Middle East. Businesses also cite solid U.S. demand and high oil prices as key support for export expectations.

Tariffs add pressure to costs and inflation expectations

The quarterly publication also includes results from the Business Leaders’ Pulse, an online survey conducted monthly, with the latest readings covering July, August and September 2026, as well as special consultations in July and August on how companies are adapting to trade tensions and uncertainty.

Expectations for input price growth, selling price growth and inflation ease but remain elevated. Responses gathered after the breakdown in trade talks suggest renewed trade tensions are dampening sentiment as well as export and investment outlooks.

The new tariffs and counter-tariffs are also putting upward pressure on costs, prices and inflation expectations, pointing to a more difficult operating environment for Canadian firms even as underlying demand indicators improve earlier in the quarter.

In our earlier article on rising U.S. toy prices, we explained how import tariffs and energy- and shipping-linked costs were pushing retail prices higher ahead of the holiday season. The report noted that even after some tariff easing, shelf prices can stay elevated due to earlier pricing cycles, while Middle East-related disruptions keep pressure on fuel, commodities, and logistics—factors that can persist and filter through to broader inflation dynamics.

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