Business sentiment weak, but inflation expectations easing, BoC surveys show

Canadian businesses are growing less concerned about inflation, but they continue to expect subdued sales and remain reluctant to invest or hire workers, according to a survey by the Bank of Canada.

As a result, companies remain hesitant to grow their operations, either by investing in new machinery and equipment or adding to their headcount. The survey, which was conducted from Aug. 8 to Aug. 30, found that businesses are focusing on replacing and repairing equipment “rather than on expanding production or improving efficiencies.”

Nearly two-thirds of the firms surveyed think inflation will be between 2 per cent and 3 per cent over the next two years. That’s good news for the central bank, which has worked hard to anchor inflation expectations following the surge in prices in 2022 and 2023. The survey found that consumers are becoming less pessimistic about their financial situation. However, more than half of the respondents still expect a recession in the next year and most plan to reduce their spending and save more.

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