As the Bank of Canada prepares for its July 30th meeting, it looks like we’re in for more of the same: a whole lot of nothing. No rate cuts, no surprises, just a market sitting in neutral. But behind the headlines, there’s a more nuanced story playing out, one that involves business confidence, consumer sentiment, inflation, and a potential economic stall.
Let’s unpack the data and what it all means for borrowers, investors, and anyone trying to navigate today’s shaky economic ground.
Business Confidence: Off the Lows, But Still Unsteady
The Bank of Canada recently released a new Business Outlook Survey, which gives us a peek into how companies are feeling. The good news? We’re off rock bottom. Business confidence had hit zero, yes, literally zero, but there’s now a slight uptick. What’s behind the cautious optimism?
- Businesses no longer fear the worst-case scenario from recent tariff talks.
- Most companies are holding onto staff instead of making cuts.
- Price hikes are being held back to avoid losing cost-conscious consumers.
However, the investment and hiring outlook remains muted. Businesses are surviving, not thriving.
➤ Question for you: If businesses are reluctant to invest or expand, what does that mean for job growth and innovation?
Inflation’s Stickiness Is a Problem
Even if the Bank of Canada gave us a symbolic 25-basis-point cut, it likely wouldn’t move the needle. Inflation—especially core CPI- remains stubbornly high. One-time price shocks are manageable, but entrenched inflation is the real concern.
Why entrenched inflation matters:
- When labour markets stay tight (i.e., low unemployment), wage pressures increase.
- That can keep inflation embedded in the economy, making it harder to shake off.
- For borrowers, this means interest rates could stay higher for longer.
Canada’s unemployment rate is around 7%, so the labour market isn’t overheated… yet.
➤ What would entrenched inflation mean for your mortgage plans or refinancing strategy?
Consumer Confidence: A Telling New Indicator
The Bank of Canada also introduced a new metric: The Canadian Survey of Consumer Expectations (CSCE). This chart tells a sobering story:
- Job security confidence (blue): Falling.
- Household financial health (yellow): Falling.
- Consumer spending sentiment (green): Falling.
Canadians are anxious—about their jobs, their budgets, and their ability to spend. It’s not the lowest confidence has ever been, but it’s headed in that direction.
➤ How has your confidence changed this year? Are you spending less, saving more, or holding off on big decisions?
Are We Headed for Stagflation?
It’s the word no one wants to hear: stagflation.
This happens when:
- The economy is stagnant or shrinking.
- Inflation remains high.
- The central bank is essentially powerless to help.
With inflation refusing to budge and economic activity slowing down, we’re seeing the early warning signs. The Bank of Canada is stuck on the sidelines, unable to stimulate growth without fanning the inflation flames.
➤ Is this the new normal, or will we finally see some rate relief by year-end?
The Bottom Line: It’s Gloomy, But Not Hopeless
Yes, confidence, both consumer and business, is down. Yes, inflation remains a thorn in the side of growth. And yes, the Bank of Canada may continue to sit tight while we ride this out. But here’s the thing: this too shall pass.
While you wait for rate relief, Cannect is here to help you make smart money moves. Whether you’re looking to refinance, invest in our Mortgage Investment Corporation (MIC), or just understand your options, we’re ready to help, without the bank hassle.
📞 Talk to us today. Let’s find the best solution for your unique financial situation.
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