What the Bank of Canada's Q1 2026 Surveys Said About Canada's Economy

As of May 2026, the Bank of Canada's first quarter surveys showed a cautious Canada. Households still expected higher food prices and feared job loss, while businesses grew more confident: in the first quarter of 2026 the share of firms expecting a recession within 12 months fell from 22% to 9%, the lowest since 2023.

I am Moe Asgarian, a real estate broker in Toronto, and I read these two surveys every quarter because they tell me what buyers and sellers are about to do before my phone rings. The Bank publishes them after each quarter closes. One asks ordinary Canadians what they expect, the other asks businesses. Banks, investors and the Bank itself all weigh them.

What Canadian households said in the first quarter of 2026

Before the conflict in the Middle East began, Canadians were already careful with money. High prices and worry about the economy were the main reasons, and the tariff fight with the United States had made everyone more cautious. Even so, in the first quarter of 2026 households were slightly more hopeful than the quarter before, because trade tension with the United States had eased. Inflation expectations stayed high in that same quarter. Food was the sharpest worry, and many people expected groceries to cost more over the 12 months following the survey.

How the conflict in the Middle East changed household spending

After the conflict started, most Canadian households told the Bank they expected it to weaken Canada's economy and push prices up, gasoline and food first. If the fighting dragged on, they expected sharp increases. If it ended quickly, they expected slower price growth, and some thought gasoline could even come down. In the first quarter 2026 consumer survey, behaviour had already shifted: 21% had cancelled or delayed a trip, and 28% had postponed a large purchase or simply spent less. At the time these surveys were discussed in May 2026, a fragile ceasefire was holding.

The tariff file was still open alongside it. In the same first quarter 2026 survey, Canadians said they preferred to buy Canadian made goods over American ones, and to travel inside Canada rather than to the United States. Mr. Carney had said publicly, as of that period, that leaning on the United States is a policy whose time has passed. What that turns into, in trade terms, was still to be seen in the spring of 2026.

Job security and AI sat underneath everything

In the first quarter of 2026, households still described the Canadian labour market as weak, and fear of losing a job was high, especially in roles where AI might take over part of the work. There were bright spots in that same quarter. Energy was improving, oil prices had risen, and regions such as Alberta were doing better. But even public sector employees reported more worry about their jobs than before. On AI itself, most employees surveyed in early 2026 used it for writing, planning and analysing data to work faster, and most did not expect it to change their own job much within a year. People who used AI tended to expect higher productivity and even higher pay. Overall, though, Canadians in that survey expected AI to reduce job openings and working hours. Consumer confidence had improved, but as of the first quarter of 2026 it was still not in good shape, and clearly weaker than before the tariff war began.

Businesses were more confident than in late 2025

The business survey was the brighter of the two. Sentiment in the first quarter of 2026 improved compared with late 2025, worry about the trade war with the United States eased, and in that quarter the share of firms expecting a recession within 12 months dropped from 22% to 9%, the lowest since 2023. Firms expected better sales. Many said customers who had held back during the trade tension were coming back, and government projects, particularly infrastructure and defence, were helping. In the first quarter 2026 survey, close to half of firms said they would add staff over the following year, although most of those additions would be small. Investment was going into productivity and capacity rather than routine maintenance. As of the first quarter of 2026, firms expected wage growth of about 3.5% and thought the pace of increases had slowed from the year before. They reported no severe labour shortage in that quarter, but finding the right person had become a little harder than a year earlier.

Where costs were still rising in the spring of 2026

Exporters were the cautious group. In the first quarter 2026 survey, most Canadian exporters said their goods complied with the Canada, Mexico and United States agreement and were exempt from tariffs at that time, which took some pressure off. Many still had not found markets outside the United States, because shipping costs are high and distant markets are hard to enter. After the conflict began, firms grew more worried about energy, transport and fertilizer costs, and by the spring of 2026 agriculture, oil and gas, transport and some manufacturers were already feeling the increase. Many said they could not pass all of it to the buyer, because purchasing power was lower and competition was tougher, so they absorbed part of the cost and accepted a smaller margin. Oil and gas firms expected stronger sales on higher energy prices. Steel producers expected weaker demand and softer prices. The Bank noted that firms' inflation expectations had edged up after the conflict began, but as of the first quarter of 2026 they remained far below the peak of the tariff crisis in early 2025.

What this meant for Toronto buyers and sellers in May 2026

Here is what I tell my clients. These surveys measure sentiment, not statistics, and sentiment is exactly what decides whether someone signs. A household that is afraid of a layoff does not commit to a mortgage, however good the listing looks. That is a large part of why the Toronto market in the spring of 2026 had willing buyers who kept waiting. The other half of the story is that the Bank reads these same surveys before it sets rates, so when business confidence recovers and inflation expectations stay contained, the path for borrowing costs gets easier. If the conflict in the Middle East ended and shipping through the Strait of Hormuz returned to normal, Canada could put its attention back on the tariff file, and that would be good news for anyone financing a home here.

If you are weighing a move in Toronto or the GTA and want to talk through what this means for your own numbers, fill out the form at the bottom of this page or book a free consultation. Stay well and take care.