Businesses anticipate their sales will grow but at a slower pace, according to the latest Business Outlook Survey by the Bank of Canada.
Christina Morillo
For many firms, this slowdown will follow a period of exceptional strength over the past year. Businesses also link their expectations of weaker sales growth to interest rate increases, high inflation and concern about a recession. Some firms, mostly those whose sales depend on housing activity and household consumption, expect outright sales declines, but the share of these firms is smaller than in the previous survey,” said the Bank.
“Generally, businesses plan to invest more in the next 12 months. However, positive investment intentions have decreased in each quarter since early 2022, reflecting the impact of higher interest rates and recession worries.”
The Bank said firms continue to view the labour market as tight, though labour shortages and wage growth pressures have eased. Demand for labour has softened over the past several quarters but continues to be robust—more than half of firms still plan to increase their workforce over the next 12 months.
“Firms’ inflation expectations have moderated, but most businesses still think inflation will stay well above two per cent until at least 2025,” it said.
“Businesses anticipate that their input and output price increases over the next year will remain larger and more frequent than usual. However, as supply and demand continue to normalize, firms expect the size and pace of output price increases to moderate from those over the past 12 months. This suggests that firms are gradually shifting closer to their normal price-setting practices.”
“Businesses were more downbeat this quarter, with the survey noting that businesses are worried about cost pressures, labour scarcity, and a slowdown in economic growth,” he said.
“Firms highlighted that inflation pressures are easing (expected inflation down across all time frames), alongside loosening supply chains and lower commodity prices. Importantly, expected wage growth over the next year has not come down, which could add to future inflation.”
(Mario Toneguzzi is Managing Editor of Canada’s Podcast. He has more than 40 years of experience as a daily newspaper writer, columnist, and editor. He worked for 35 years at the Calgary Herald, covering sports, crime, politics, health, faith, city and breaking news, and business. He works as well as a freelance writer for several national publications and as a consultant in communications and media relations/training. Mario was named in 2021 as one of the Top 10 Business Journalists in the World by PR News – the only Canadian to make the list)
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