Taking the Pulse of Canadian Business: 5 of the Most Interesting Things We Learned This Quarter

Each quarter, the Business Data Lab releases the Canadian Survey on Business Conditions (CSBC) report, which takes the pulse of businesses across the country.

This quarter’s good news: the Bank of Canada is increasingly winning the war against inflation, as we saw last week when inflation finally reached the 2% target. Canada’s economy is still growing at a moderate pace, and despite a slowdown in hiring, businesses expect a “soft landing” for the labour market, with employment growing modestly over the next three months.

Here are five of the most interesting findings from the latest edition of the CSBC report:

Business optimism highest it’s been in three years

Over 76% of businesses feel very or somewhat optimistic about the next 12 months. This is the third consecutive quarter that long-term business outlook has improved and it’s the best showing for the year-ahead question in almost three years.

Housing affordability is impacting business sentiment

Business sentiment is weakest in British Columbia and Ontario. In Vancouver and Greater Toronto especially, high housing prices and associated debt levels, along with impending mortgage renewals, are curbing consumer spending. In Quebec and Atlantic Canada, where housing affordability challenges aren’t as great, businesses are more optimistic.

Fewer businesses are expecting to raise selling prices

In the context of the Bank of Canada’s 2% inflation target finally being achieved in August, we’re seeing firms’ pricing behaviour normalize. On net, only 12% of businesses expect to raise their selling prices in the next three months, which is a noticeable 5% drop from last quarter. We’ve now returned to a level that’s consistent with the inflation target.

Supply chains are a wildcard

Last year saw the most days lost to labour disputes since 1986! There is growing percentage of Canadian exporters (39%) that expect supply chain obstacles over the next three months. Among businesses affected by these obstacles, over 40% think supply chain issues have worsened, with businesses citing delayed deliveries, higher prices and supply shortages.

Labour market is almost at pre-pandemic balance

While businesses are still reporting labour challenges (recruiting, shortage of candidates, trouble retaining skilled employees), the percentage of businesses expecting labour obstacles in the next three months has decreased since this time last year. The industries of accommodation and food services, manufacturing, retail trade, and construction have the greatest percentage of businesses expecting short-term labour challenges, whereas information and culture, real estate, transportation and warehousing have the lowest percentage.

For all this quarter’s findings on business conditions, read the full CSBC report.