What did firms say about costs and pricing?

Firms' input and selling-price expectations moderated but remained elevated, with oil and trade cited as key factors. Some companies facing large cost increases planned to keep passing them on to customers. Others saw improved demand as an opportunity to rebuild margins they had given up earlier.

Did consumers and firms expect a recession?

Only 6% of firms expected a recession in the next year, down from 17% in the second quarter. Among consumers, 53.0% expected a recession in the next 12 months, slightly below the 54.6% recorded in the previous quarter. The consumer reading therefore remained elevated even as it edged lower.

BoC Q3 Survey: Business Sentiment Improves, Consumer Inflation Expectations Rise

Q: Why do consumer inflation expectations matter?

Inflation expectations can influence wage demands, price-setting and spending decisions, so central banks monitor them closely. When longer-run expectations rise toward short-run levels, it can make inflation more persistent. The survey showed five-year consumer expectations rising to 3.91% from 3.39%.

The Bank of Canada's third-quarter Business Outlook Survey showed firmer business sentiment and a sharp rise in future sales expectations, while consumer five-year inflation expectations climbed to 3.91%. About three-quarters of responses were collected before Canada-US trade talks broke down, and the central bank said post-breakdown responses were weaker.

Disclaimer: News content is based on public news sources and provided for information only. It does not constitute investment advice.

BoC Q3 Survey: Business Sentiment Improves, Consumer Inflation Expectations Rise

Forexlive·10/19/2026, 15:37:25· forex

Business outlook improves from the second quarter

The Bank of Canada's Business Outlook Survey indicator rose to -0.33 in the third quarter from -0.38 in the second quarter, which was revised from -0.39. The future sales balance jumped to +42 from +15, a much stronger reading than in the prior quarter. The share of firms reporting an outright sales decline over the past 12 months fell to 18% from 22%, and only 6% expected a recession in the next year, down from 17%. Firms pointed to easing trade tensions and reduced Middle East risk, while exporters cited solid US demand and high oil prices.

Timing caveat: most responses predate trade breakdown

Timing limits the survey's read on current conditions: about three-quarters of business interviews were conducted before Canada-US trade talks broke down and Ottawa announced new counter-tariffs. The consumer survey had a similar cutoff, with roughly three-quarters of responses collected before the August 21 breakdown. The Bank of Canada included a special analysis of responses gathered after the talks collapsed, saying those firms reported weaker sentiment and lower export sales expectations. The central bank said some of the earlier improvement in third-quarter business outlooks had reversed, though sentiment remained considerably stronger than at the height of trade tensions in 2025.

Pricing behavior keeps inflation pressure visible

Firms' input and selling-price expectations moderated but remained elevated, with the Bank of Canada linking much of the pressure to oil and trade. Companies facing large cost increases said they planned to continue passing them on, and some viewed improved demand as a chance to rebuild margins given up earlier. That behavior matters for inflation because cost pass-through and margin rebuilding can keep price growth persistent even as broader pressures ease. In the survey, 41% of firms expected inflation above 3% over the next two years, down from 44% in the second quarter but still a substantial share.

Consumer inflation expectations rise across horizons

Consumer five-year inflation expectations rose to 3.91% from 3.39%, an increase of more than half a percentage point that brought longer-run expectations closer to elevated short-term readings. The Bank of Canada said consumer expectations at all horizons moved higher after the trade talks broke down, a timing detail that complicates the headline reading. Households reported better financial health because of asset gains and somewhat greater labor-market confidence, but spending plans weakened from already low levels due to high prices and uncertainty. The share of consumers expecting a recession in the next 12 months edged down to 53.0% from 54.6%, while labor-market perceptions improved for workers exposed to US trade and worsened for those in jobs at higher risk of AI task replacement. Economists watch whether long-run expectations converge with short-run ones because that can make inflation more persistent.

Bank of CanadaBusiness Outlook Surveyinflation expectationsCanada tradeconsumer sentiment

Frequently asked questions

What is the Bank of Canada Business Outlook Survey?▾

The Business Outlook Survey is a quarterly Bank of Canada survey of firms that tracks sentiment on sales, investment, hiring, pricing and inflation expectations. Its headline indicator and balances of opinion are widely watched as a gauge of business conditions in Canada. The survey is complemented by a separate consumer survey on household finances and inflation expectations.

What did the third-quarter survey show about business sentiment?▾

The Business Outlook Survey indicator improved to -0.33 from -0.38 in the second quarter. The future sales balance rose sharply to +42 from +15, and fewer firms reported declining sales or expected a recession in the next year. Firms cited easing trade tensions, reduced Middle East risk and solid US demand as supportive factors.

Why is the survey timing important?▾

About three-quarters of business interviews and a similar share of consumer responses were collected before Canada-US trade talks broke down in August. The Bank of Canada said firms surveyed after the breakdown reported weaker sentiment and lower export sales expectations. That means the headline results mostly reflect conditions before the latest trade tensions were fully felt.

Why do consumer inflation expectations matter?

Key takeaways

Business outlook improves from the second quarter

Timing caveat: most responses predate trade breakdown

Pricing behavior keeps inflation pressure visible

Consumer inflation expectations rise across horizons

Common mistakes to avoid

Reacting to a single headline without reading the full context — one data point is rarely the whole story.
Treating rewritten news as a signal — it describes what happened, never what to do next.
Confusing AI-rewritten content with the original source — always verify important facts against the primary report.

BoC Q3 Survey: Business Sentiment Improves, Consumer Inflation Expectations Rise

Business outlook improves from the second quarter

Timing caveat: most responses predate trade breakdown

Pricing behavior keeps inflation pressure visible

Consumer inflation expectations rise across horizons

Frequently asked questions

Key takeaways

Common mistakes to avoid

Related reading

Business outlook improves from the second quarter

Timing caveat: most responses predate trade breakdown

Pricing behavior keeps inflation pressure visible

Consumer inflation expectations rise across horizons

Frequently asked questions

Key takeaways

Common mistakes to avoid

Related reading