Over 70% of Canadian businesses remain optimistic despite inflation and labour obstacles
Statistics Canada conducted the Canadian Survey on Business Conditions from October to early November, capturing the operating environment and future expectations of businesses across Canada.
The survey reflects a mix of ongoing challenges and optimism among Canadian businesses.
Real gross domestic product grew by 1.3 percent on a year-over-year basis in August, while consumer inflation stood at 2.0 percent year-over-year in October, remaining below 3 percent throughout 2024.
Employment saw minimal changes in October, with an increase of 15,000 jobs (+0.1 percent) and an unchanged unemployment rate of 6.5 percent.
Cost-related obstacles were a significant concern, with nearly two-thirds (65.7 percent) of businesses anticipating such issues over the next three months. These include inflation, rising input costs, interest rates, insurance, real estate expenses, and transportation costs.
Rising inflation was identified as the most common challenge, with over two-fifths (44.9 percent) of businesses in the fourth quarter expecting it to be an obstacle. This marks the first time since its introduction in 2022 that fewer than 50 percent of businesses cited inflation as an issue.
Retail trade (60 percent), manufacturing (53.6 percent), and accommodation and food services (52 percent) sectors were most likely to expect inflation-related challenges.
The rising cost of inputs was the second most frequently cited issue, affecting nearly two-fifths (37.6 percent) of businesses. Agriculture, forestry, fishing, and hunting (57.4 percent) and accommodation and food services (55.3 percent) sectors reported the highest expectations of input cost challenges.
The Bank of Canada reduced its overnight lending rate to 3.75 percent in October 2024, its fourth consecutive cut since June.
Interest rate and debt costs were expected to pose challenges for 28.5 percent of businesses in the fourth quarter, a decline from 34.1 percent in the third quarter and 40.6 percent in the second quarter.
Over the past 12 months, nearly half (48.1 percent) of businesses reported medium or high impacts from interest rates, with the cost of existing debt being the most commonly affected factor (33.3 percent).
Nearly two-fifths (37.3 percent) of businesses expect labour-related challenges, including recruiting and retaining skilled employees and overall labour shortages.
Recruiting skilled employees was the fourth most cited obstacle, affecting 28.3 percent of businesses. Retaining skilled employees (19.3 percent) and labour shortages (19.1 percent) were also commonly reported.
Despite these obstacles, 71.6 percent of businesses indicated optimism about their outlook for the next 12 months.
Sales expectations over the next three months softened slightly, with 16.6 percent of businesses expecting increases, led by retail trade (25.8 percent), manufacturing (24.1 percent), and information and cultural industries (22.7 percent).
Concurrently, 19.3 percent of businesses anticipated raising prices for goods and services, driven by the accommodation and food services sector (34.5 percent).
More than two-fifths (42.6 percent) of businesses expect to increase average hourly wages over the next 12 months, with 17 percent anticipating faster increases than in the previous year. Inflation (54.4 percent) and talent retention (49.3 percent) were the top factors influencing wage decisions.
In the fourth quarter, 15.6 percent of Canadian businesses required at least one employee to be bilingual in English and French, while 5.2 percent required all employees to be bilingual.
Quebec (46.2 percent) and New Brunswick (28.9 percent) reported the highest proportions of businesses requiring bilingual employees.
