Canadian businesses continue to deal with rising costs, inflation pressure and uncertainty tied to international trade, according to a new survey released by Statistics Canada.
The Canadian Survey on Business Conditions found 64.3% of businesses expect cost-related obstacles over the next three months, up from 58.9% in the first quarter. The survey was conducted from April to May as inflation moved higher and economic growth remained slow.
Inflation remained the top concern for businesses. Nearly half, 48.8%, said inflation is expected to be an obstacle in the months ahead. Accommodation and food services, retail trade and manufacturing businesses reported the highest levels of concern.
Businesses also pointed to rising labour, energy and raw material costs. Nearly three in 10 said input costs are expected to create challenges over the next three months. Agriculture, manufacturing and hospitality businesses were among the sectors most affected.
The survey also highlighted uncertainty around the tariffs on Canadian imports. About 34% of businesses said they expect the tariffs to negatively affect their operations over the next year. Manufacturers, wholesalers and agricultural businesses were the most likely to report concern.
At the same time, nearly half of businesses said they do not expect the tariffs to affect them, while others said the long-term impact remains unclear.
Some businesses said they have already adjusted prices because of higher costs linked to tariffs and trade-related expenses. More than 28% reported passing some of those costs onto customers over the past year. Another one-third said they may do the same over the next 12 months.
That comes as inflation has started moving higher again. Canada’s annual inflation rate rose to 2.8% in April. One-quarter of businesses also said they expect to increase prices over the next three months, particularly in retail, wholesale trade and food services.
The survey found limited evidence that recent efforts to promote Canadian-made products have significantly boosted sales. About 16.6% of businesses said they changed marketing strategies over the past year to highlight Canadian products.
However, only 14.2% reported increased sales of Canadian products, while more than two-thirds said sales did not increase.
Use of artificial intelligence continued to expand. Nearly one in five businesses said they used AI over the past year to help produce goods or deliver services, up sharply from 6.1% in 2024.
Businesses most commonly used AI for data analysis, text analysis and virtual assistants or chatbots. Still, many companies said AI remains outside their immediate needs. Others cited costs, cybersecurity and privacy concerns as barriers.
Business sentiment remained relatively stable overall. About two-thirds of businesses said they remain optimistic about the next 12 months.
Still, expectations for stronger growth remain limited. Fewer than one in five businesses expect sales to rise over the next three months, while 16.3% expect sales to decline.