For the first time since 2020, the outlook among Canadian businesses has turned negative.
The latest survey from the Bank of Canada has found that both businesses and consumers see the economy headed for a mild recession in the next 12 months.
The central bank’s business outlook indicator fell to -1.1 in this year’s first quarter, down from 0.1 previously. Businesses expect slower sales growth due to higher interest rates, high inflation, and concerns about an economic recession.
The data suggests that the Bank of Canada’s aggressive interest rate increases over the last year are lowering inflation expectations and are starting to cool the economy.
The Bank of Canada opted to hold its benchmark overnight interest rate at 4.50% in March, with the next decision scheduled for April 12.
Businesses across Canada think inflation will remain above the central bank’s 2% target until at least 2025.
About half of Canadian businesses have incorporated the risk of a recession over the next year into their business plans.
Companies added that demand for labour remains healthy, with more than half of businesses saying they plan to increase the size of their workforce in the next 12 months.
