Fears of a recession in Canada have fallen among business leaders since the early days of the COVID-19 pandemic, even as economists warn a soft landing is becoming a "distant prospect" as central banks front-load interest rate hikes to tame red-hot inflation.
Modus Research asked a sample of 600 Canadian managers and executives to gauge the odds of Canada slipping into a recession over the next year. Thirty-eight per cent of respondents to the poll released on Thursday say such a downturn is "highly likely."
That figure has fallen from 59 per cent in May 2020, according to the Toronto-based agency.
"Since the spring of 2020, there has been a large drop-off in the number of Canadian business leaders who think Canada is heading towards a recession," Modus stated in a news release. "Although coverage of the issue in the national media has suggested that fears over a recession run high, they are well below the levels seen early in the pandemic."
Modus says prior to the pandemic, expectations for a recession were at 18 per cent.
"Concerns about a recession remain well above pre-COVID levels, and are not insignificant," the agency added.
Regionally, recession fears among business leaders were found to be strongest in the prairies and Alberta, with 57 per cent and 55 per cent, respectively, saying a recession is "highly likely." Ontario was next at 36 per cent. After Ontario came British Columbia at 30 per cent, Quebec at 29 per cent, and the Maritimes at 24 per cent.
The poll found household debt and "big companies controlling too much of the market" tied as the top foreseen risks to the Canadian economy over the next year, followed by labour shortages (51 per cent), inflation (48 per cent), rising interest rates (46 per cent), and the residential real estate market (29 per cent).
While Canadian executives and managers may be sleeping easier now compared to the uncertain early days of the pandemic, economists warn the Bank of Canada's steepest tightening cycle in decades will have consequences.
RBC senior economist Josh Nye is calling for mild recessions in Canada, as well as the U.S., the U.K., and Europe later this year, or in 2023.
"With policymakers pledging to do what it takes to rein in inflation, we think a soft landing is becoming a distant prospect," he wrote in a note to clients on Monday.
The Bank of Canada is set to make its next rate announcement on Oct. 26.
Jeff Lagerquist is a senior reporter at Yahoo Finance Canada. Follow him on Twitter @jefflagerquist.