CANADA'S LEADING INFORMATION SOURCE FOR THE METALWORKING INDUSTRY

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CANADA'S LEADING INFORMATION SOURCE FOR THE METALWORKING INDUSTRY

CANADA'S LEADING INFORMATION SOURCE FOR THE METALWORKING INDUSTRY

Canadian Chamber report reveals businesses proceeding with caution as economic confidence edges up

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Cost-related challenges dominate the top business obstacles with more than half of all businesses getting squeezed by high interest rates the Canadian Chamber's latest survey reveals. PHOTO courtesy KUKA.

Canadian businesses are stuck in a cautious near-term holding pattern according to the Canadian Chamber of Commerce’s new Business Expectations Index (BEI).

The BEI finds that business sentiment in Canada remains weak in the first quarter of 2024 (at 99.1), despite improving from the previous quarter (93.9). For this indicator, an index score of 100 is the threshold that separates improving sentiment (scores above 100) from deteriorating sentiment (scores below 100).

The business outlook in Canada is currently being dragged down by Ontario (96.8) and British Columbia (98.0) but is notably stronger in Atlantic Canada (102.6) and Quebec (102.5). At the local level, business sentiment is weakest in major Southwestern Ontario cities (including London, Toronto and Hamilton) and Vancouver. With economic growth slowing, firms are reporting rising concerns about insufficient consumer demand.

“Affordability challenges and high interest rates are weighing on consumers and businesses, but the impacts vary significantly across the country,” says Stephen Tapp, Chief Economist with the Canadian Chamber’s Business Data Lab (BDL).

Our findings highlight the interconnected nature of household and business challenges right now. We see a clear link geographically — in the locations that Canadian families are feeling the financial squeeze the most, which has them pulling back on discretionary spending, businesses are feeling more pessimistic about the outlook.

Released as part of the BDL’s Q1 2024 Canadian Survey on Business Conditions Report, conducted in partnership with Statistics Canada, the BEI is a timely, forward-looking measure of business sentiment that allows business owners, economists, market watchers and policymakers to gain insights across a wide variety of business contexts.

“Canadian businesses possess a deep knowledge of their operations and have a strong sense of where things on-the-ground are headed,” says Tapp.

By analyzing survey responses from more than 15,000 businesses each quarter — and tracking their expectations for sales, employment, investment and profits across 70 different business types — we’re able to provide relevant, nuanced and actionable insights into where the economy is going in the near-term. BEI sentiment indicators drill down beyond the national picture, allowing businesses of all sizes, sectors and ownership groups to assess and adjust their business strategies based on the situations that are most relevant to them.

Here are some additional key trends the BEI reveals for Canadian businesses in the first quarter of 2024:

  • Cost-related challenges dominate the top business obstacles with more than half of all businesses getting squeezed by high interest rates.
  • Facing continued cost pressures, firms’ pricing behaviour still has not fully normalized. Despite headline inflation recently falling back into the Bank of Canada’s inflation control target range, the share of companies expecting to raise prices next quarter remains historically elevated, at 25%.
  • Businesses expect modest employment growth in the next three months, as labour market conditions continue to come into better balance between supply and demand. That said, labour market challenges remain acute in accommodation and food services, construction and healthcare. Recruiting challenges are still a major issue in the tech sector.
  • Micro firms (one to four employees) continue to struggle with debt constraints, while firms with 100 or more employees are much more optimistic about the outlook.
  • There is an even split between the number of sectors with improving and deteriorating outlooks. Improvement is led by finance (which benefited from recent equity market gains) and a rebounding manufacturing sector. Deteriorating sectors include those more sensitive to the pullback in consumer spending and high interest rates, such as transportation, accommodation and food services, and real estate.
  • Among underrepresented groups, Indigenous-owned businesses are the most optimistic and represent a clear bright spot, while businesses owned by immigrants are much more pessimistic.

Read the full report and access the Business Expectations Index to explore business sentiment by geography, industry, firm size, business ownership, international trade status and more

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