Firms continue to anticipate weak demand
Firms’ sales expectations remain weak. Businesses no longer expect sales growth to strengthen over the coming year as tariff-related impacts continue to hold back demand (Chart 4, blue bars). Firms attribute this anticipated weakness largely to broad spillover effects from the trade conflict, such as:
- weak spending by business customers on services (such as renovations as well as corporate travel and events) and capital goods
- low consumer spending or concerns that consumers could start to spend less
- weak outlooks in the housing sector
However, the balance of opinion on indicators of future sales (e.g., order books, advance bookings, sales inquiries) has improved marginally and now sits near zero (Chart 4, red line). In other words, the number of firms that reported their indicators have deteriorated is about the same as the number that said they have improved.
In consultations conducted by Bank staff, retailers echoed this slight improvement in demand: after weakness in early 2025, consumer spending has picked up, with sales outperforming retailers’ earlier worst-case expectations. These retailers attributed this result to factors such as lower interest rates and gas prices, more domestic tourism, and consumers adapting to higher uncertainty. Similarly, in the Bank’s surveys, more firms than last quarter reported that their customers’ Buy Canadian spending behaviour is boosting their sales volumes. However, this still represents a small share of firms.
