Macroeconomic Outlook

Navigating uncertainty – what’s on the horizon for Canadian businesses.

In brief

• Macroeconomic volatility is shaped by geopolitical tension and conflict. But it’s bigger than geopolitics alone.
• The latest EY-Parthenon CEO Outlook Survey shows confidence is moderate but holding strong as leaders explore opportunities layered within disruption.
• Canada faces constrained growth in a subdued environment, focusing on fundamentals can help leaders adapt and build resilience.

Governments, consumers, CEOs and other stakeholders in Canada must make sense of a world they’ve never experienced before. With possible solutions come execution risk. Canada needs the talent, skills, capacities and materials to make good on nation-building megaprojects, innovation opportunities and other drivers with the potential to supercharge the national economy. That’s why many leaders are focusing on fundamentals.

A quarter defined by slow growth, soft conditions and structural pressures

Canada’s growth outlook remains constrained. What’s holding back economic momentum? Soft labour-market conditions, subdued consumer sentiment, supply shocks and continued geopolitical uncertainty. Specifically, over this quarter:

• GDP stalled. Higher imports and a continued decline in business investments indicate a slow, uneven path forward.
• Inflation hovered near target but is expected to inch upwards. Near-term, energy-driven volatility will play a part in this.
• Consumer confidence weakened as people wrestled with affordability and labour market pressures. Gradual improvement could come in 2027, as real incomes stabilize and economic conditions improve.
• Policy response held steady, with the Bank of Canada likely to keep rates near 2.25% through 2026.

All told, growth is expected to linger around ~0.9%, with energy-driven inflation and continued uncertainty influencing the months ahead.

Canadian businesses are acclimating to change and forging ahead despite uncertainty

Across the Canadian C-suite, a shift is taking place. Leaders are becoming accustomed to volatility, recognizing that current operating realities reflect a broader — entrenched — structural shift.

Interesting to note, business sentiment continues edging upward despite rising input and other costs and ongoing uncertainty. Indicators like sales growth expectations, investment recovery and hiring intention appear optimistic. In fact, the latest EY-Parthenon CEO Outlook Survey shows confidence is moderate but holding strong as leaders explore opportunities layered within disruption. They’re prioritizing resilience and cost discipline — particularly disciplined growth — as well as operational efficiencies.

What’s the bottom line this quarter?

From the macroeconomic standpoint, three key dynamics are increasingly likely to define the operating environment in the second half of the year:

• Continued geopolitical tensions are driving more persistent energy market pressure, with implications for inflation, trade flows and broader economic growth.
• Canada’s $1-trillion nation‑building agenda may outpace execution capacity, constraining how many large‑scale projects can advance in parallel.
• Regulatory complexity risks slowing major projects if speed and certainty fail to match Canada’s stability advantage.