-- The Bank of Canada's release on Monday of the Q1 Business Outlook Survey (BOS) shows there was no fear of inflation among Canadian business leaders prior to the Iran conflict, and some growing signs of economic optimism, said Rosenberg Research.
The survey was largely conducted between Feb. 5 and Feb. 25, so the data is "stale," but it still reveals a placid baseline inflation trend that inflation hawks should note, stated Rosenberg Research.
The headline diffusion index improved considerably from -1.78 in Q4 2025 to -0.36, still contractionary but the strongest pulse since Q4 2022, pointed out Rosenberg.
Business leaders were more optimistic across the board: the net share seeing future sales growth grew from 13% to 25% --highest since Q4 2024; for investment in machinery & equipment soared from 14% to 29% -- highest since Q4 2024; and future employment rose from 16% to 38% -- highest since Q1 2023.
Meanwhile, the inflation indicators were "placid," added Rosenberg. The net share seeing input price inflation slumped to 2% from 12%, and the comparable for output price inflation fell to -8% versus 6%.
The share seeing inflation above 3.0% year over year fell from 16% to just 11%, the lowest since Q4 2020, in the depths of the COVID-19 pandemic. There was only a "modest" sign of any supply-side bottlenecks, with 36% seeing "some difficulty" in meeting demand, up from 27% in Q4 2025, according to Rosenberg.
The BoC also released its Survey of Consumer Expectations (CSCE), which ticked up very slightly for Q1 from -1.00 to -0.77, but remained negative for the 18th straight quarter. Business leaders might be more optimistic about the labor market, but consumers weren't, as the labor market index declined from -0.11 to -0.13, said Rosenberg. One-year inflation expectations ticked down from 4.1% to 4.0%.
While this main survey is also stale -- conducted from Feb. 5 to Feb. 25, so before the Feb. 28 start of the Iran war -- Canada's central bank conducted supplemental surveys from March 26 to April 2. Consumers were concerned, with 81% seeing higher inflation from the war, 21% reporting they have canceled or postponed travel and 28% reporting spending cutbacks due to the conflict.