Businesses coping well with headwinds: StatsCan

By James Langton | November 25, 2022 | Last updated on November 25, 2022
2 min read
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Canadian businesses continue to face challenges from supply chains to labour shortages, but their growth expectations remain relatively rosy, according to new data from Statistics Canada.

The national statistical agency’s latest survey of business conditions — which was carried out between October and early November — found that almost half of respondents expect to see their operating costs rise, and one-third expect profits to suffer.

At the same time, StatsCan noted that fewer businesses are experiencing supply chain challenges, with 23.5% anticipating difficulty acquiring inputs, down from 26.8% in the third quarter. Among the companies facing these issues, the share reporting that supply constraints have worsened is down to 52.0% from 58.2% in the previous survey.

Most businesses are expecting supply challenges to stay the same (57.8%) or to improve (12.4%) in the next three months, StatsCan said.

The survey found that inflation remains the top challenge as input costs rise, with 58.4% expecting inflation to be an obstacle and 48.1% citing the rising cost of labour, capital, energy and raw materials as an obstacle in the months ahead.

Additionally, StatsCan said that 39.4% of businesses expect rising interest rates and debt costs to be an issue in the next three months.

Despite the ongoing price pressures, however, the number of businesses expecting to raise prices over the next three months remained stable compared with the third quarter, the agency reported.

Less than one-third of businesses (32.4%) expect to raise their own prices in the next three months, down slightly from 34.0% in the third quarter.

Just over half of firms (52.8%) said they expect profitability to remain relatively unchanged over the next three months. And the share of businesses that see profits declining was down slightly to 34.4% from 35.9% in the previous survey.

“Future outlook remains relatively unchanged from the previous quarter, with over two-thirds (70.3%) of businesses reporting being either very optimistic or somewhat optimistic about their future outlook over the next 12 months,” StatsCan said.

Overall, the survey’s results point to slightly stronger-than-expected conditions in Q4, noted RBC Economics in a research note.

The fact that most businesses expect to hold prices steady in the next quarter is “in line with expectations that early green shoots in easing/narrowing inflation pressure in recent months will be extended through the quarters ahead,” RBC said.

Additionally, as higher interest rates continue to work their way through the economy, this should also act as a brake on inflation, it noted.

“The Bank of Canada may be nearing the end of its hiking cycle provided those trends continue,” RBC said. “We look for one more hike of 25 basis points in the overnight rate in December, before the central bank pauses to reassess the impact of higher interest rates to-date.”

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James Langton

James is a senior reporter for Advisor.ca and its sister publication, Investment Executive. He has been reporting on regulation, securities law, industry news and more since 1994.