Canadian Survey on Business Conditions, second quarter 2025

Released: 2025-05-27

Businesses continue to anticipate a variety of obstacles over the next three months (see Note to readers), mainly related to costs and labour. While these pressures have continued to endure into the second quarter of 2025, the proportion of businesses with a positive outlook has dropped to 70%, the lowest since the first quarter of 2024.

Recent months have seen a rise in business uncertainty due to both the potential imposition and actual imposition of tariffs on Canadian goods and services imported by the United States. In early 2025, the United States levied a 25% tariff on all non-Canada-United States-Mexico Agreement (CUSMA) compliant goods entering the United States from Canada, along with a 10% tariff on energy product exports from Canada. Following this, the United States also levied a 25% tariff on Canadian steel and aluminum, as well as a 25% tariff on Canadian automobiles that are non-CUSMA compliant, or on the non-US content of the vehicles if they are CUSMA-compliant. Subsequently, Canada imposed a 25% counter tariff on $30 billion of imports from the United States, reciprocal tariffs on certain steel and aluminium products, and a 25% tariff on non-CUSMA compliant US-made vehicles and on the US content of CUSMA compliant US-made vehicles.

In addition, real gross domestic product rose 1.6% on a year-over-year basis in February 2025, and consumer inflation rose 1.7% year over year in April 2025, down from a 2.3% increase in March 2025. Meanwhile, overall employment was little changed in April 2025 (+7,400; +0.0%), following a decline of 33,000 (-0.2%) in March 2025. Conversely, the unemployment rate rose 0.2 percentage points to 6.9% in April 2025.

In this macroeconomic context, Statistics Canada conducted the Canadian Survey on Business Conditions from April to early May 2025. The survey collects information on the environment businesses are currently operating in and their expectations moving forward.

Cost-related obstacles remain steady, with nearly two-thirds of businesses expecting them as a concern

The proportion of businesses that expect cost-related obstacles over the next three months was steady at 65.4%, similar to the first quarter of 2025 (62.5%). Within the Canadian Survey on Business Conditions, cost-related obstacles consist of inflation; cost of inputs; interest rates and debt costs; the cost of insurance; cost of real estate, leasing or property taxes; and transportation costs. In March 2025, prices of raw materials purchased by manufacturers operating in Canada, as measured by the Raw Materials Price Index, fell 3.0% month over month and declined 3.6% year over year. Additionally, average hourly wages were up 3.4% on a year-over-year basis in April 2025, following a growth of 3.6% in March 2025.

Within this context, nearly half (49.3%) of businesses across Canada expect inflation to be an obstacle over the next three months, making it the most expected obstacle in the second quarter of 2025. This is most expected by businesses in accommodation and food services (66.7%); arts, entertainment and recreation (57.8%); and retail trade (57.3%).

Cost of inputs—which includes costs of labour, raw materials, and energy—is the second most expected obstacle, anticipated by over one-quarter (27.7%) of businesses. Businesses in manufacturing (55.3%); agriculture, forestry, fishing and hunting (51.2%); and accommodation and food services (39.1%) were most likely to expect the cost of inputs to be an obstacle.

When asked to indicate which expected obstacle would be the most challenging over the next three months, 13.8% of businesses reported inflation, 9.1% indicated cost of inputs, and 8.6% reported recruiting skilled employees.

Rise in the proportion of businesses expecting cost of raw materials to be an obstacle

Over one-quarter (27.7%) of businesses expect the cost of inputs to be an obstacle over the next three months, with inputs including labour, capital, raw materials and energy. Among these inputs, over three-fifths (61.9%) of businesses expect the cost of raw materials to be an obstacle. This is nearly 18 percentage points higher than the proportion observed in the first quarter of 2025, when 44.3% of business indicated cost of raw materials (of the 26.7% that expected cost of inputs to be an obstacle). Businesses most likely to expect the cost of raw materials to be an obstacle are in construction (87.4%), manufacturing (83.2%), and accommodation and food services (73.3%).

Labour challenges result in management working increased hours

Over one-third (35.0%) of businesses expect to face labour-related obstacles over the next three months. Among these businesses, nearly half (46.4%) expect the impact of labour-related obstacles to result in management working increased hours. This was most expected by businesses in professional, scientific and technical services (68.1%).

Following this, just under two-fifths (39.6%) of businesses expecting labour-related obstacles expect them to limit the growth of their business over the next three months, led by businesses in manufacturing (55.0%).

Nearly one-fifth of businesses expect a high level of impact from tariffs

Nearly one-fifth (18.1%) of all businesses, whether they are engaged in trade or not, anticipate that the imposition of tariffs by the United States on imports from Canada would have a high level of impact on their business. Businesses in transportation and warehousing (40.4%), manufacturing (38.5%), and agriculture, forestry, fishing, and hunting (34.7%) were most likely to indicate a high level of impact. Meanwhile, 16.4% of businesses expect a medium level of impact, and 17.5% expect a low level of impact, while over one-quarter (27.9%) expect that the imposition of tariffs by the United States on imports from Canada would have no impact on their business. A further 20.1% of businesses are unsure what impact tariffs would have on their business.

In a similar vein, nearly one-fifth (18.5%) of businesses across Canada, whether they are engaged in trade or not, anticipate that the imposition of tariffs by Canada on imports from the United States would have a high level of impact on their business, led by businesses in wholesale trade (37.1%), manufacturing (32.4%), and retail trade (32.1%). In addition, 18.3% of businesses expect a medium level of impact from the imposition of tariffs by Canada on imports from the United States, 18.5% expect a low level of impact, and nearly one-quarter (23.4%) expect no impact. On the other hand, 21.3% of businesses are unsure what impact tariffs on imports from the United States would have on their business.

Business optimism falters

While 70.0% of businesses are either very optimistic or somewhat optimistic about their outlook over the next 12 months, this represents the first time the proportion of businesses with an optimistic future outlook has fallen to 70% or below since the first quarter of 2024.

Meanwhile, 16.2% of businesses expect their sales of goods and services to increase over the next three months, a slight decrease from 16.7% in the first quarter of 2025. This was led by businesses in information and cultural industries (24.9%), finance and insurance (24.1%), and arts, entertainment and recreation (23.9%). In the same vein, just over one-quarter (26.5%) of businesses expect to raise the prices of their offered goods and services over the next three months.

Operational costs are the main impediment to business growth

When asked to indicate the primary factor limiting business growth, just over one-quarter (26.0%) of businesses indicated high operational costs. This was most frequently indicated by businesses in accommodation and food services (51.8%); arts, entertainment and recreation (37.5%); and retail trade (36.2%). At the same time, one-fifth (20.0%) of businesses across Canada indicated that their primary focus over the next 12 months was to reduce operational costs. Businesses operating in accommodation and food services (36.7%); mining, quarrying, and oil and gas extraction (32.1%); and arts, entertainment and recreation (32.0%) were most likely to cite reducing operational costs as their primary focus.

Meanwhile, a further 15.5% of businesses indicated workforce skill shortages as the primary factor limiting the growth of their business, led by businesses in construction (24.8%). At the same time, 9.4% of businesses indicated upskilling current employees as the primary focus for their business over the next 12 months.

High implementation costs are the most common barrier for the adoption of digital infrastructure

Over the last three years, 45.0% of businesses across Canada have made some sort of investments into digital infrastructure, whether it be significant, moderate, or minor investments. On the other hand, just over two-fifths (41.0%) of businesses made no investments into digital infrastructure and have no plans to invest. In addition, 5.1% of businesses indicated that while they made no investments in the last three years, they do have plans to invest in the future. A further 8.7% are unsure about the status of the digital investments made in the previous three years.

When asked about the primary barrier to adopting new or additional digital infrastructure, one-fifth (20.2%) of businesses indicated their primary barrier was the high costs of implementation, while 14.2% indicated an uncertainty about return on investment. Furthermore, 13.7% indicated there were no barriers for their business at all when adopting digital infrastructure. More than two-fifths (42.0%) of businesses indicated digital infrastructure was not relevant to their business.

Products

The infographic "Business Conditions in Canada, second quarter of 2025," part of the series Statistics Canada—Infographics (Catalogue number11-627-M), is now available.

Contact information

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