Macklem urges "humble" forecasts as trade uncertainty and tariffs reshape Canada's economic outlook
Uncertainty is shaping Canada’s economic outlook, with the Bank of Canada preparing to take a “humble” approach to its forecasts and policy decisions.
The Canadian Press reports that Governor Tiff Macklem emphasized the need to “put a lot of emphasis on the risks” as the central bank resumes formal economic forecasting at its October 29 interest rate decision.
Macklem stated, “There is a lot of uncertainty, and we're going to have to be humble about our forecast”.
Business confidence remains subdued across the country, with trade uncertainty—especially from the United States—holding back investment and hiring.
BNN Bloomberg notes that the Bank of Canada’s business outlook survey shows most firms are prioritizing routine maintenance over expansion.
The survey’s confidence indicator improved only marginally from the previous quarter and remains well below historical averages.
Exporters in the steel and aluminum sectors report “especially weak outlooks” and “significant layoffs” due to US tariffs. Firms in Saskatchewan also cite Chinese tariffs on canola and other agricultural products as a drag on investment plans.
Bloomberg reports that the business outlook indicator rose slightly to minus 2.3 in the third quarter, but “firms’ outlook and intention remain subdued.”
Expectations for growth in domestic export sales are soft, and most businesses say their outlays are intended to replace or repair machinery and equipment.
Uncertainty continues to be the most cited concern, followed by cost pressures, slowing demand, and taxes and regulations.
Inflation expectations have moderated, but firms expect cost increases amid trade uncertainty and tariffs, with weaker demand limiting their ability to pass higher costs to consumers.
The survey also shows that binding labour shortages have fallen to the lowest level since 2020.
On the consumer side, Bloomberg highlights that two-thirds of Canadians now expect a recession within the next 12 months, a figure much higher than before the trade conflict began.
While most households feel their financial health has improved from the previous quarter, confidence in the labour market is deteriorating, especially among public sector workers affected by federal cost-cutting.
Inflation expectations for vehicles facing US tariffs have risen, and consumers are increasingly prioritizing Canadian-made goods and domestic vacations.
The Canadian Press reports that Macklem sees the artificial intelligence boom as a “countervailing force” supporting investment and productivity, particularly in the United States.
However, he cautions that AI also brings risks, and policy-makers need to better understand its broader economic and labour market impacts.
Looking ahead, The Canadian Press states that the Bank of Canada will closely monitor how tariffs, trade uncertainty, and shifting consumer behaviour are affecting export volumes, investment, and inflation.
Macklem concludes, “Let’s get all the data, let’s look at the forecast, let’s have the deliberations and we’ll come to our best assessment and a decision on Oct. 29”.
