Business sentiment has softened in Canada, with many firms expecting slower sales growth amid rising interest rates and cooling demand, and a majority now think a recession is likely in the next 12 months, a Bank of Canada survey showed on Monday.
While there are early signs that pressures on prices and wages are easing, business inflation expectations remain high, the third quarter Business Outlook Survey showed. Consumers, meanwhile, expect faster rising prices in the near term, though longer-term expectations have eased, a separate survey found.
Despite the grim outlook, business sentiment remains positive. Firms linked to housing activity expect higher rates to hurt their sales, while others now anticipate a slower - though still healthy - pace of sales growth, the survey found.
"While many firms anticipate a recession, those not linked to housing activity and other household consumption do not expect it to have a large impact on demand for their products and services," the report said.
The majority of consumers also expect a recession in the next 12 months. The Bank of Canada has hiked it policy rate by 300-basis points since March, with money markets betting on another 50-bp increase to 3.75% at its next decision on Oct. 26.
