Data released on Monday by the Bank of Canada says that “the share of firms planning or budgeting for a recession in Canada over the next 12 months” dropped in February, before the Iran war began.
The data showed the sentiment declined from 22 per cent to nine per cent, marking the lowest level since the series began in 2023 and coming at a time when “concerns around trade tensions and tariffs were at a peak.”
The survey was conducted from Feb. 5 to 25 — before the U.S. and Israel attacked Iran on Feb. 28 in a war that has sent shockwaves through global supply chains.
“Expectations at all horizons remain below the peak reached during the height of the trade conflict in early 2025,” the survey reads.
The survey is based on interviews with about 100 firms across the country, stating that “trade tensions are weighing less on firms’ outlooks.”
“Compared with recent quarters, fewer businesses reported impacts on their expected sales or costs,” the survey reads. “As a result, firms began the first quarter of 2026 better positioned than they were in late 2025 to face the economic shock associated with the war in the Middle East.”
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Despite these improvements, “outlooks remain subdued among firms in, or serving, industries that are facing export tariffs or that are indirectly impacted by U.S. trade policies.”
Fewer businesses also reported that they faced obstacles to growing their export sales due to uncertainty around U.S. and Canada’s trade relationship.
“For example, fewer firms indicated that they are hesitant to enter the U.S. market or that U.S. customers are hesitant to use Canadian suppliers,” the survey reads, with just a “small share” of exporting firms reporting increased sales to non-U.S. customers.
“Most businesses had revised up their expectations for input prices, mentioning specifically fuel, freight, fertilizers and exchange rates.”
According to the Canadian Federation of Independent Business’ March report, higher overall costs for businesses were one of the main reasons for a drop in optimism.
Fuel costs, specifically, saw the largest monthly jump among the options survey respondents could select for what was contributing to their overall cost pressures at 50 per cent, which was up by 14 percentage points.
Canada had produced 32.8 per cent — around 76.1 million tonnes — of the world’s total potash, a key mineral in fertilizers, in 2024, remaining the world’s largest potash producer, according to Natural Resources Canada.
The war in Iran has also had experts saying that Canadians are “unlikely to see a notable change in food, fuel or oil prices in the near future” earlier this month.
The Bank of Canada is set to announce the latest interest rates on April 29.
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