Supply chain challenges continue for Canadian businesses

More than one in four Canadians businesses (26.3  per cent) are facing challenges maintaining inventory levels or acquiring inputs, products or supplies, either domestically or abroad. And, one-fifth (20.3 per cent) expected these challenges to worsen in the short term, according to the latest Statistics Canada Canadian Survey on Business Conditions released on Monday.

The survey, from January to early February, also found that over the next three months, half of businesses expected their operating expenses to increase, one in three businesses expected their profitability to decrease, nearly one in three expected to increase the prices they charge, and four in five expected their number of employees to remain the same.

Statistics Canada

“Over one-quarter (26.3 per cent) of businesses expected supply chain challenges of some kind over the next three months, down from the previous quarter (29.8 per cent). Businesses in wholesale trade (47.4 per cent) and retail trade (41.2 per cent) were the most likely to expect various supply chain challenges over the next three months,” said the report.

“Among the businesses that expected supply chain challenges of some kind over the next three months, nearly two-fifths (39.6 per cent) reported that the challenges they have experienced have worsened over the last three months, down from 52.0 per cent of businesses in the fourth quarter of 2022.

“While one-fifth (20.3 per cent) of businesses expected supply chain challenges to worsen over the next three months, two in three (66.9 per cent) expected the situation to remain about the same and more than one in 10 (12.8 per cent) expected the challenges to improve. This was an improvement from the previous quarter, when 29.8 per cent expected supply chain challenges to worsen, 57.8 per cent expected challenges to remain about the same, and 12.4% expected the challenges to improve.”

The report said many businesses expected to continue facing challenges due to rising inflation and costs related to inputs. Prices of raw materials purchased by manufacturers operating in Canada, as measured by the Raw Materials Price Index, increased 1.2% year over year in January 2023, following a 7.5% year-over-year increase in December 2022. Meanwhile, average hourly wages rose 4.5% on a year-over-year basis in January, down from 4.8% in December, it said.

“Rising inflation remained the top obstacle expected by businesses over the next three months  . . . with nearly three in five businesses (58.1 per cent) expecting it to be an obstacle, led by businesses in mining, quarrying, and oil and gas extraction (67.6 per cent); accommodation and food services (67.5 per cent); and agriculture, forestry, fishing and hunting (64.6 per cent),” said StatsCan.

“The rising cost of inputs, including labour, capital, energy and raw materials, was the second most commonly expected obstacle, with 45.7 per cent of businesses expecting it to be an obstacle. Businesses in accommodation and food services (68.2 per cent) were the most likely to expect this as an obstacle, followed by businesses in agriculture, forestry, fishing and hunting (66.8 per cent) and manufacturing (66.2 per cent). After peaking in the first quarter of 2022, the number of businesses that expected the rising cost of inputs to be an obstacle remained relatively stable into the first quarter of 2023.

“Overall, two in five businesses (40.2 per cent) expected rising interest rates and debt costs to be an issue in the next three months. Roughly half of the businesses in agriculture, forestry, fishing and hunting (54.1 per cent); real estate and rental and leasing (50.8 per cent); and transportation and warehousing (49.8 per cent) expected this to be an obstacle.”

The report said the future outlook remained relatively unchanged from the previous quarter, with over two-thirds (67.5 per cent) of businesses reporting being either very optimistic or somewhat optimistic about their future outlook over the next 12 months. The businesses most likely to be optimistic about their future outlook were those in arts, entertainment and recreation (76.6 per cent) and health care and social assistance (75.8 per cent).