A better mood did not cancel planned price increases
No. Stronger sentiment in the Bank of Canada’s third-quarter 2026 Business Outlook Survey does not mean firms have stopped planning price increases. Released on October 19, 2026, the survey shows better sentiment and stronger sales outlooks than in the second quarter. Expectations for input-price and selling-price growth moderated but stayed elevated, and firms with larger-than-normal cost increases still planned to pass them on.
A calmer business mood can sound like relief for household bills. These interviews record expectations and plans. They are not a grocery total, a rent payment, a gasoline purchase, or a Bank of Canada interest-rate decision.
Most interviews came before talks broke down
The Bank interviewed firms in person, by video, and by phone from August 6 to September 2, 2026. About three-quarters of the interviews came before Canada-U.S. trade talks broke down and new Canadian counter-tariffs were announced. This issue also includes the Business Leaders’ Pulse for July, August, and September 2026, and July-August consultations on adapting to trade tensions.
The improvement is therefore mostly a late-summer result, not a reading of conditions on the October 19 release date or on October 25, when this page was checked. The overview says the sentiment gain rests on evidence gathered mostly before the breakdown.
Sentiment had weakened in the previous quarter, largely because of the war in the Middle East, and then improved. Rising input costs and war-related uncertainty still weighed on firms, but those reports were less widespread than in the second quarter. The share planning or budgeting for a Canadian recession over the next 12 months fell from 17 percent to 6 percent, the lowest since the question began in 2023. The Bank says that decline fit improved sentiment early in the quarter. It is a share of respondents, not a published probability of recession.
Firms interviewed after the breakdown cited new U.S. tariffs on some goods exports and Canadian counter-tariffs. The overview’s account of post-breakdown results says the tariffs were dampening sentiment, weakening export and investment outlooks, and putting upward pressure on costs and prices. That warning is not the same finding as the third-quarter improvement.
Sales strengthened without a plan to cut prices
Firms reported stronger past sales and better sales outlooks. The balance of opinion on future-sales indicators rose above its historical average. Trade tensions, the Middle East war, and related uncertainty weighed less on domestic sales than in the second quarter. Indirect effects, such as weaker consumer confidence and less spending by businesses in tariff-affected sectors, were less severe.
The gain was uneven. Consumer discretionary firms saw somewhat better outlooks, helped by budget-friendly products and stronger tourism. Housing-related sales outlooks remained weak. They improved only in the sense that demand seemed to be stabilizing after a softening, not recovering. Several firms again said public infrastructure and defence spending supported their outlooks.
Before the breakdown, export-sales indicators edged up and stayed well above average. U.S. demand supported manufacturing, tourism, professional services, and firms tied to U.S. artificial-intelligence and other infrastructure investment. High commodity prices and more production and transport capacity supported oil and gas and other natural-resource exporters. Few exporters said trade tensions were weighing on sales outlooks. Some were seeking new markets or changing products and services.
Investment intentions eased slightly but stayed robust. Demand supported plans generally, and commodity strength supported natural-resource firms. Firms also planned spending on digital tools, including artificial-intelligence features in software, machinery, and automation, to raise efficiency. The visible text says trade tensions were weighing less on near-term sales, then breaks off as it turns to longer-term trade uncertainty. No later chart values are used.
Hiring plans stayed soft, and most firms intended to keep headcounts unchanged. The majority still reported spare capacity, though a slightly larger share than last quarter said an unexpected demand increase would be hard to meet. Those facts keep the sentiment gain from being read as a hiring boom. They are not the price result.
Price expectations eased only partway
Expectations for growth in input prices and selling prices moderated but remained elevated. Firms often linked them to high global oil prices and trade tensions. Businesses facing larger-than-normal cost increases planned to continue passing them on. For several, further pass-through reflected somewhat improved demand and an effort to make up for past margin compression.
Pass-through means the firm plans to raise the customer price instead of absorbing the whole increase. Better demand can make that easier if orders are expected to hold. Making up for past margin compression means an earlier cost was not fully priced, so a later increase restores margin rather than matching only a new bill. The Bank states those motives. It gives no common dollar change for every firm.
A labeled hypothetical, not a survey result, uses round figures. If an unusual cost increase is $4 and the firm passes on the full $4, the pre-tax price rises by $4, assuming no other cost or tax change. If it absorbs half, the pre-tax price rises by $2. The survey prints neither figure.
For the quarter, firms’ inflation expectations eased but stayed elevated. After the breakdown, the overview says those expectations rose with new tariffs and a rebound in energy prices, and that tariffs put upward pressure on costs and prices. Neither statement is a current household bill. Together they say the better mood did not erase elevated price plans, while post-breakdown evidence points to renewed pressure.
Firms were also changing operations: supply chains, efficiency, new markets, and, for some, less capacity. Efficiency might reduce a firm’s costs later. Less capacity can work in the opposite direction for customers. The survey does not say which effect had already shown up in prices.
The next Business Leaders’ Pulse and Business Outlook Survey are the check: whether price expectations stay elevated after more post-breakdown responses, and whether unusually large cost increases are still slated for pass-through.