Canada’s economy is holding steady, but the underlying signals point to a business environment that is not yet set up for stronger growth.

Trade remains the defining pressure shaping business behaviour. Even a year after a wave of tariffs and trade disruptions, most firms are still adapting cautiously. With weak demand, persistent uncertainty and limited small business dynamism, the risk is not an abrupt downturn but a gradual erosion of Canada’s growth capacity.

Business outlook

Business outlook has been negative for the past seven consecutive quarters, highlighting a fragile outlook despite modest growth forecasts of 2.2% in 2026.

**Source:** BDL analysis using Statistics Canada’s Canadian Survey on Business Conditions.
**Note:** Data collected January–February 2026 and does not reflect recent geopolitical developments and potential energy price impacts.

**Note:** Optimistic includes “somewhat optimistic” and “very optimistic”; pessimistic includes “somewhat pessimistic” and “very pessimistic.” Reponses do not sum to 100% because of “unknown” responses.
**Source:** BDL analysis using Statistics Canada’s *Canadian Survey on Business Conditions*.

Business obstacles

While cost and inflationary pressures are beginning to ease, they remain the leading obstacle for half of all businesses. Weak demand, not labour challenges, has emerged as the second‑largest barrier to growth, cited by over one‑third of firms.

**Source:** BDL analysis using Statistics Canada’s *Canadian Survey on Business Conditions*; 8,793 business responses in January and February 2026.

Trade

Goods exporters remain pessimistic amidst trade turmoil, hitting a seven-quarter streak.

**Source:** BDL analysis using Statistics Canada’s Canadian Survey on Business Conditions.

Trade diversification

USMCA use remains at a 20-year high. The share of goods exports to the U.S. claiming NAFTA/USMCA tariff preferences rose from 67% in 2025 to 83% in February 2026.

**Source:** BDL analysis using U.S. Census Bureau
**Note:** *NAFTA utilization data shown through June 2020; USMCA utilization data from July 2020 onward. 2026 data is available through February, the most recent month of reporting.

Canada’s trade diversification is being driven by existing exporters doing more, not more firms exporting.

**Source:** BDL analysis using Statistics Canada’s Trade in Goods by Exporter Characteristics (Table 12-10-0104-01).
**Note:** Exporter counts reflect the number of establishments reporting exports; changes may reflect both market conditions and reporting thresholds.

In this quarter, more organizations diversified their suppliers outside of the U.S. than their sales.

Labour market

Canada’s labour market is softening — there are more job seekers than there are available jobs, which gives employers more leverage.

Labour obstacles

Accommodation and food services, construction and retail trade have the highest percentage of businesses expecting labour obstacles over the next three months. In all three of these industries, more than a third of businesses expect difficulty recruiting skilled employees.

Nearly half of businesses in accommodation and food services and construction report having difficulty finding candidates with the top reason being low applicant interest.

Nearly half of businesses (46%) face skills gaps and are responding by training, not hiring.

40% of businesses are planning to do in-house training
- 20% are planning to use mentoring or coaching
13% are planning to use external training

Wage growth

Even though wage growth is higher than pre-pandemic norms, it’s not translating into affordability for many lower-wage workers.

In accommodation and food services, 119% of the weekly average pay is needed for essentials, while 95% of the weekly average pay is needed in arts, entertainment and recreation.