Business sentiment index

Canadian business sentiments are shaped by interconnected factors. Economic indicators like GDP growth, inflation and interest rates influence confidence, as do government policies, consumer spending trends and labor market conditions. External forces, encompassing geopolitical events and the global economic climate, further sway sentiment. Industry-specific dynamics add another layer. These elements are gauged through surveys like the Bank of Canada's Business Outlook Survey, where sales expectations, investment intentions and capacity pressures collectively paint a comprehensive picture of Canada's economic outlook and business confidence.

The business sentiments index has experienced significant fluctuations during the current period, mainly due to the pandemic's impact and government measures to mitigate its effects on the economy. The index plummeted in 2020 as the pandemic unfolded but rebounded in 2021 and 2022. During these years, historically low interest rates and supportive fiscal policies boosted confidence among businesses and investors. However, from 2023 to 2024, this positive trend reversed, with confidence declining sharply due to a dramatic rise in interest rates and increasing inflation creating more uncertainty. Looking ahead to 2025, many businesses are expected to maintain a pessimistic outlook due to persistently high interest rates and the economy's inability to operate at full capacity.