ottawainflation expectations among canadian companies eased slightly from a peak reached last year with 79 of firms surveyed anticipating annual prices increases above 3 until 2025 according to a bank of canada quarterly survey the bank of canadas businessoutlook survey suggested nearly half of canadian companies expect sales to slow over the next 12 months as consumers pare back spending in response to higher interest rates robust inflation and the risk of a recession the surveys broadest gauge of business confidence fell in the first quarter into negative territory or its lowest level since the peak of the covid19 pandemic over 40 of companies have incorporated the possibility of a recession into their business plans the survey said the business survey along with another measuring consumer expectations offer bank of canada senior officials important pieces of data before issuing its next interestrate decision later this month on april 12 bank of canada in march left its main interest unchanged at 450 following a roughly 10month rapidfire raterising campaign and in doing so became the first major developedworld bank to call a pause on further monetarypolicy tightening central bank officials said they wanted to assess how higher rates are affecting economic activity the central bank noted that survey responses were collected prior to banking pressures spurred by the collapse of two us banks as a result some economists such as bank of nova scotias derek holt advised clients prior to the surveys release that the results would be a tad stale the bank of canada sets interest rate policy to reach and maintain 2 inflation after peaking at just over 8 in mid2022 canadas inflation rate has slowed hitting 52 in february in the fourth quarter 84 of firms surveyed said they expected inflation to remain above 3 over the next two years the firstquarter survey suggested an easing to 79 businesses attribute persistent inflationary pressures mainly to high labor costs and strong domestic demand the central bank said output data for january indicated the canadian economy grew 05 in january following a 01 slide in the previous month statistics canada said early data suggest the economy rose 03 in february  meaning growth is tracking ahead of the bank of canadas projections firms surveyed continue to view the labor market as tight the central bank said though labor shortages and wage growth pressures have eased the survey indicated 47 of businesses said laborcosts would be higher over the next year relative to 54 in the prior quarter in an accompanying survey of consumer expectations about a third said they would spend on less over next year relative to the previous 12month period on travel restaurant meals and other entertainment activities consumers surveyed also indicated that they feared that supplychain constraints and elevated government spending would hamper the bank of canadas ability to reach its 2 inflation target canada issued last week a budget plan for 2023 that incorporates higher spending and bigger deficits than anticipated