Canadian business uncertainty is riding high but reality may not be as bad as expected. The Bank of Canada (BoC) released the results of its quarterly Business Outlooks Survey (BOS) for Q1 2025, revealing a sharp decline in the country’s future GDP growth. A report from BMO warns this erosion in expectations is very real, and has likely worsened since the survey was conducted. However, reality shows that businesses have underestimated the country’s economic output in recent years.
BoC Survey Shows Canadian Businesses Are Bearish On The Economy
Uncertainty is bad news for consumers and businesses, and Canadians face a lot of it right now. Trade wars with the two largest economies in the world, a new head of government, and an election that can shift national priorities. It’s easy to understand why businesses feel shaky about the country’s economy.
“The Bank of Canada’s quarterly Business Outlook Survey revealed a pullback in sentiment in Q1,” explains Douglas Porter, Chief Economist at BMO Capital Markets.
Adding, “The overall indicator pulled back to -2.1, after edging up in the prior two quarters. Looking over the more than 20-year history of the survey, that level is consistent with roughly zero growth in coming quarters.”
BoC Business Outlook Survey Has Underestimated GDP Since 2023
Eroding business sentiment is never great, but this data has a silver lining. “It’s not an air-tight fit with GDP (although reasonably good), as it has underestimated growth in the past few years, after overestimating in the years just before the pandemic,” explains Porter.
Source: BMO Capital Markets; Statistics Canada; Bank of Canada.
His point is clearly observed in the most recent years in the above chart of BoC BOS expectations vs GDP reality. Since 2023, businesses have been underestimating growth—predating even the first hints of tariff discussions.
BMO Still Sees Canadian GDP Growing In 2025, But Not Much
The BoC Q1 survey was conducted in February, just after tariffs had been delayed. Since then, the intensity and reality of the situation have started to hit businesses. BMO notes this has darkened the outlook for businesses even further.
Even considering that, BMO still sees the economy outperforming expectations. “On balance, we are reasonably comfortable with our call of two quarters of stress on Canadian growth, and overall GDP of about 0.5% this year and next,” said Porter.
Not exactly a blowout when it comes to GDP, but any growth is better than none. That also assumes that the trade conflict continues at this pace. Any escalation can further darken that outlook, but conversely, a faster-than-expected resolve is also likely to boost the global economy.