Search

No Summer Lift for Business Confidence

Canadian Economics

By: Jake Lenarduzzi

    

Business confidence continues to dwindle, as ongoing uncertainty and a widening set of concerns have led Canadian businesses to take a cautious stance on investment. For many firms, the next favourable window to invest remains unclear and out of sight.

  • The Conference Board of Canada’s Index of Business Confidence fell by 1.5 points to 63.0 (2014 = 100), marking another new low outside of the pandemic.
  • Our latest survey was conducted from June 23 to July 11, 2025, with nearly all responses collected before U.S. President Donald Trump’s July 10 announcement of a proposed 35 per cent tariff on Canadian goods.
  • The drop in confidence was largely driven by a 5.0-percentage point increase in firms operating below optimal capacity and a 3.0-percentage point increase in those seeing it as an inferior time to expand.
  • While most businesses expect relatively stable financial and profitability conditions, more firms expect deterioration rather than improvement—a trend consistent with recent surveys.
  • The share of firms planning on increasing capital spending over the next six months fell for the second quarter in a row and has remained below 50 per cent since late 2022.
  • Investment performance remains weak as well, with 39.2 per cent of firms reporting returns below expectations compared to six months ago.
  • On a more positive note, price expectations showed improvement. In this survey, 68.4 per cent of businesses expect Canadian prices to rise at an annual rate of 3 per cent or less over the next six months—a double-digit increase from the previous survey.
  • Ontario remains the top destination for planned investment, cited by over 40 per cent of firms for a third consecutive survey. The Prairies exceeded 30 per cent for the first time since the third quarter of 2024.
  • Overall, business sentiment toward Canada’s economic outlook remains distrustful, with nearly 85 per cent of executives expecting conditions to hold steady or worsen over the next six months.

Key insights

Business confidence remains deeply subdued. The Index of Business Confidence decreased by 1.5 points this quarter, falling to its lowest level outside of the pandemic. Although less steep compared to last survey’s double-digit decline, the downward trend still reinforces a broader sense of caution. Over 40 per cent of respondents cited weak market demand and government policies as the two leading factors holding back planned investment. Until these challenges ease, business investment is expected to remain restrained.

Weak market demand has re-emerged as a top concern for firms, reflecting broader global economic uncertainty. For the first time since 2020, more than half of Canadian businesses identified weak market demand as a key barrier to investment. While trade dynamics are contributing, downgraded growth outlooks across major global economies and ongoing uncertainty are also major factors. On a brighter note, fewer firms cited depreciation of the Canadian dollar as a concern. The Canada-U.S. exchange rate strengthened this spring, supported by higher oil prices and a weaker U.S. dollar, pressured recently by investor unease, federal debt issues, and China’s efforts to elevate the yuan as an international reserve currency. Looking ahead, our Canadian 5-Year Outlook forecasts the loonie to edge higher against the U.S. dollar, offering some relief in the face of market demand apprehensions.

Trade tensions continue to weigh on business sentiment. U.S. President Donald Trump has recently threatened to impose 35 per cent tariffs on all Canadian goods starting August 1—a date now serving as the revised deadline for Canada-U.S. trade talks. Currently, the U.S. is enforcing a 25 per cent tariff on all non-CUSMA-compliant Canadian goods and a 10 per cent tariff on energy and potash. When asked whether tariffs (or tariff threats) would affect their capital investment plans over the next six months, roughly 39 per cent of respondents said yes, 39 per cent said no, and 22 per cent were unsure. With more than a third in the ‘yes’ column, it is clear that tariff pressures are weighing on Canadian businesses at this time.

Please explore our Canada in a Changing World series to learn how Canada can navigate uncertainty and position itself for long-term success.

Related Insights

See More Insights

Comments