MNI: Canadians See Recession Even On Weaker Tariffs- BOC Polls

Canadians still expect some chance of a recession even with exporters seeing less of a hit than feared from the biggest trade war with the U.S. since the 1930s according to central bank surveys published Monday in the week before its next rate decision, while inflation expectations remain above target.

Two-thirds of households expect a recession in the next 12 months and 28% of business owners expect that kind of a downturn.

The share of firms predicting inflation will range between 2% and 3% over the next two years climbed to 51% in the second quarter from a prior 44%. Consumers see inflation at about 4% a year from now, little changed from the last report. 

Surveys were mostly taken in May before President Donald Trump raised his tariff threat to 35% while pushing back his deadline to Aug. 1. 

Business prospects for sales and investment remain subdued, the Bank said, and hiring plans remain soft but few are considering outright layoffs. "While worries about tariffs directly affecting Canadian businesses have eased slightly, new concerns have emerged about the broader impacts of tariffs on the global economy and on demand in Canada," the Business Outlook Survey said.

"Competitive pressures and and the current weakness in demand are limiting firms' ability to pass on these costs to customers," the report said.

The Bank unveiled a new summary measure from its longstanding consumer sentiment survey. The indicator declined for a second quarter, to -1.07 from -0.74 and -0.36 in the fourth quarter of last year.