The Bank of Canada's latest Business Outlook Survey, released October 19, 2026, says roughly half of Canadian firms plan to pass on some or all of the cost increases tied to tariffs and the Middle East war. For owners, this isn't an inflation headline. It's a preview of the prices on your next round of tenders.
What happened
The Bank of Canada interviewed about 100 firms between August 6 and September 2, 2026. Roughly three-quarters of those interviews were completed before Canada-U.S. trade talks broke down on August 21, and the Bank analyzed the later responses separately. After the breakdown, Canada announced new counter-tariffs.
The headline was mildly positive. Sentiment improved from the second quarter, and the share of firms planning or budgeting for a recession over the next year fell from 17% to 6%, the lowest since the question was introduced in 2023. Investment intentions eased slightly but stayed robust. The Bank also noted that public spending on infrastructure and defence supported business outlooks.
The price picture is less comfortable:
- Cost expectations are elevated. On the Bank's balance-of-opinion measure, expected input price growth over the next 12 months eased to 94 in the third quarter from 111 in the second. That is still well above its historical average of 82. Expected selling price growth eased to 76 from 90, against an average of 63.
- Pass-through is rising. Roughly half of firms plan to pass on some or all of their cost increases from the Middle East war and tariffs, more than last quarter.
- Costs are running ahead of prices. Among firms interviewed after the trade talks collapsed, 47.4% reported slight or significant increases in their costs, but only 31.5% reported increases in their selling prices. Earlier in August, those shares were 42.1% and 26.2%.
- Labour is tight where construction needs it. Shortages were roughly unchanged overall but concentrated in skilled trades and specialized technical roles. A larger share of firms said hiring was harder than a year ago.
View the data
| Quarter | Input prices | Selling prices |
|---|---|---|
| Q1 2024 | 73 | 63 |
| Q2 2024 | 86 | 67 |
| Q3 2024 | 80 | 51 |
| Q4 2024 | 87 | 70 |
| Q1 2025 | 88 | 77 |
| Q2 2025 | 71 | 70 |
| Q3 2025 | 72 | 62 |
| Q4 2025 | 83 | 54 |
| Q1 2026 | 82 | 58 |
| Q2 2026 | 111 | 90 |
| Q3 2026 | 94 | 76 |
What it means for owners
The cost wave hasn't finished moving through the supply chain. When firms report costs rising faster than their own selling prices, they are absorbing margin. Suppliers and trades don't absorb margin forever. The gap between the 47.4% and 31.5% figures is, in practical terms, price increases that haven't yet shown up in quotes. Owners tendering in the next two quarters should expect to see them.
Budgets built on spring pricing are probably light. A cost plan prepared before August didn't account for the trade-talk breakdown or the counter-tariffs. If your escalation allowance is a single percentage across the whole estimate, it is almost certainly in the wrong places. It's likely too thin on steel, aluminum, electrical gear and imported mechanical equipment, and possibly too generous on local, labour-heavy packages.
Contracts will carry the friction. On programs we've supported, tariff shocks show up first as short bid validity periods, then as escalation clauses, then as claims on contracts already signed. Trades that have been quietly absorbing costs are the most likely to come back with price adjustment requests, or to struggle financially mid-job. Neither shows up in a monthly report until it's late.
Don't over-read the improved mood. Lower recession fears and robust investment plans sound helpful, but busier suppliers price with more confidence. The Bank itself noted that almost one-quarter of firms couldn't say when inflation will return to 2%, and its next rate decision is due October 28. Owners shouldn't build financing assumptions around an outcome nobody can call yet.
What to do now
- Re-price exposed packages, not the whole budget. For anything tendering before mid-2027, identify the steel, aluminum, electrical and imported equipment content. Refresh those numbers with current supplier quotes and move escalation allowance to where the exposure is.
- Ask bidders to show their tariff exposure. Require a breakout of tariff-sensitive materials, their country of origin and quote validity dates. You can't manage what the bid form hides.
- Use narrow, index-based price adjustment clauses. A defined adjustment tied to a published index for a short list of materials costs less than every bidder's blanket risk premium. Get legal advice on the drafting.
- Check the health of your trades on live jobs. Ask your contractor which subcontractors have open pricing on tariff-exposed materials, and track escalation requests as a separate line in change control.
- Run two financing scenarios before October 28. Model carry costs for a hold and for a rate move, so the board sees the range before the decision rather than after it.
The bottom line
The survey says businesses are feeling better and planning to charge more. Both of those land on owners. Owners who re-price exposed packages and tighten their contracts now will tender from a realistic baseline. The rest will find out from the bids.
Want an independent read on where your budget is exposed? Book a 30-minute call with Benjamin R. Consulting.
Sources: Bank of Canada, Business Outlook Survey, Third Quarter of 2026 (October 19, 2026); Bank of Canada, BOS Q3 2026 Chart 7 data: expected input and selling prices; Bank of Canada, BOS Q3 2026 Chart 1-C data: costs and selling prices after the trade talks; The Canadian Press via BNN Bloomberg, Sentiment improved but new tariffs weigh on business outlook (October 19, 2026). This article is general information, not financial or legal advice.