Two-thirds of firms expect rising costs in Q2, report reveals
Canadian businesses continue to battle with uncertainty and trade tensions in the second quarter of 2025, as highlighted in a new report from Statistics Canada.
About 65.4% of businesses expect cost-related challenges (such as inflation, materials and labour, interest and debt payments, insurance costs, real estate expenses, and transportation costs) in the next three months, which is close to the 62.5% reported in the first quarter of 2025, the Canadian Survey on Business Conditions reveals.
In March 2025, the cost of raw materials used by Canadian manufacturers dropped 3.0% compared to the previous month and was down 3.6% compared to a year earlier. At the same time, average hourly wages rose 3.4% in April 2025 compared to the previous year, following a 3.6% increase in March.
Looking ahead, nearly half (49.3%) of businesses expect inflation to be a challenge in the next three months, making it the most commonly expected issue for the second quarter of 2025. This concern is highest in sectors like accommodation and food services (66.7%), arts and entertainment (57.8%), and retail trade (57.3%).
The second most expected challenge is the rising cost of inputs—such as labour, materials, and energy—with 27.7% of businesses anticipating it. This issue is more common in manufacturing (55.3%), agriculture and related sectors (51.2%), and accommodation and food services (39.1%).
When asked which issue they expect to be the most difficult in the next three months, 13.8% of businesses said inflation, 9.1% said the cost of inputs, and 8.6% pointed to difficulty finding skilled workers.
About 18.1% of businesses, regardless of whether they trade internationally, say that US tariffs on Canadian imports would have a major impact on them. Another 16.4% of businesses expect a moderate impact, and 17.5% expect a small impact. Meanwhile, 27.9% believe US tariffs wouldn’t affect them at all, and 20.1% aren’t sure how they would be affected.
While 70.0% of businesses are feeling optimistic—either very or somewhat—about the next 12 months, this is the first time that optimism has dropped to 70% or lower since early 2024.
At the same time, 16.2% of businesses expect their sales to go up in the next three months, slightly down from 16.7% in the first quarter of 2025. The highest expectations for sales growth are in the information and cultural industries (24.9%), finance and insurance (24.1%), and arts, entertainment, and recreation (23.9%).
Also, just over one-quarter of businesses (26.5%) expect to increase their prices in the next three months.
