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Third Quarter Report on Business Conditions
On September 19, the Business Data Lab released their Canadian Survey on Business Conditions Report for the third quarter of 2023. This report covers business conditions across various sectors, organization sizes, and areas and seeks to make predictions on what to expect for the next year based on information received from the Statistics Canada Survey on Business Conditions.
Unfortunately, the business conditions report for Q3 saw previous growth areas slowing slightly and business confidence dropping across the country but particularly in Ontario. Canadian GDP growth has dropped to 1.4% across 2023 and is expected to slow even further but still remain above 0%. When looking at how businesses predict they will perform in the next quarter, the majority of businesses expect a decrease in profitability as well as an increase to their operating expenses.
In terms of industry-specific metrics, the transportation industry saw a large decrease in sales, employment, and profitability due to the port strike that took place in July. While most industries still reported an expected increase in sales and employment, almost all industries expect to see a decrease in profitability across the next three months. This is due largely to an increase in the cost of business-related expenses and also challenges in the supply chain that remain since 2022. While the inflation rate has dropped slowly over the past quarter, it is still above the Bank of Canada’s target range which contributes to these growing costs.
When looking at organizational structure, businesses with fewer employees report to be the most concerned about decreases to sales, employment, and profitability with micro-businesses (1-4 employees) showing major concerns for sales and profitability. All other sizes of business from 5 employees and up report an expected increase in sales and employment but still a decrease in profitability.
Despite all of this, the majority of businesses across the country still report to have an optimistic outlook for the coming year with the percentage of businesses reporting optimistic outlooks as high as 79% in both Quebec and the Northwest Territories. In Ontario however, that percentage is only 59% with Toronto only having 51% of businesses reporting an optimistic outlook.
If we continue to see the inflation rate fall to the point where it remains in the target range for the Bank of Canada, we may see prices stabilize. The percentage of companies that report an expected increase to their prices has dropped from 34% in Q3 2022 to 26% in Q3 2023. This remains high but is a positive trend for consumers.
To view the full report and analysis, please visit: https://bdl-lde.ca/wp-content/uploads/2023/09/2023_Q3_CSBC_Report_FINAL_EN_v2.pdf
