Statistics Canada conducted the Canadian Survey on Business Conditions from July to early August 2022. The survey collects information on the environment that businesses are currently operating in and on their expectations for the future.

The combination of inflationary pressures, labour challenges, and supply chain issues has impacted businesses in a number of different ways. Over the next three months businesses continue to expect to face a variety of obstacles related to rising costs, hiring and retention, as well as those related to supply chains and rising inflation. Almost one-third of businesses that are facing challenges maintaining inventory levels or acquiring inputs, products and supplies, either domestically or abroad, expect these challenges to worsen in the short term. Over the next three months, half of businesses expect their profitability to remain relatively unchanged, one-third expect to increase the prices they charge, and four-fifths expect their number of employees to remain the same.

Businesses expect to face obstacles related to rising inflation and costs

Many businesses expect to continue facing challenges due to rising inflation and costs related to inputs, transportation and insurance. Prices of raw materials purchased by manufacturers operating in Canada, as measured by the Raw Materials Price Index, increased by 19.1% year over year in July, following a 32.4% year-over-year increase in June, while energy prices increased 38.8% year over year in July. Meanwhile, average hourly wages for employees rose 5.2% on a year-over-year basis in July.

The top expected obstacles are as follows:

  • Inflation – 60%
  • Cost of inputs, including labour, capital, energy, and raw materials – 47.1%
  • Transportation costs – 38.4%
  • Cost of Insurance – 31.7%

Supply chain challenges continue

26.8% of businesses expect difficulty acquiring inputs, products or supplies domestically over the next three months. Of these businesses 54.3% expect these challenges to continue for six months or more, down slightly from the previous quarter (57.3%). Meanwhile, 33.3% are uncertain how long these challenges will persist. 

While almost 1 in 10 (9.5%) businesses expect supply chain challenges to improve over the next three months, almost three-fifths (58.6%) of businesses expect the situation to remain about the same, and nearly one-third (31.9%) expect supply chain challenges to worsen.

Fewer businesses expect to raise prices over the next three months compared with the previous quarter

34.0% of businesses expect to raise prices over the next three months. Although this was down from nearly two-fifths (39.0%) in the second quarter of 2022. 54.1% of businesses in retail trade and 51.0% in wholesale trade expect to raise prices over the next three months.

50.0% of businesses expect profitability to remain relatively unchanged over the next three months. 35.9% expect their profitability to decrease, while 11.2% expect their profitability to increase. Expectations on future profitability differ by industry. 16.9% of businesses in manufacturing and 16.8% of businesses in retail trade expect profitability to increase.

80.4% of businesses expect to retain the same number of employees over the next three months, up from 76.9% during the second quarter. In contrast, 7.2% of businesses expect their number of employees to decrease, up from 5.0% in the second quarter. In accommodation and food services, 14.0% of businesses expect a decrease in their number of employees over the next three months.

Businesses have recruitment, retention and training plans to address workforce-related obstacles

Amid elevated labour demand, recent labour market tightness has been characterized by low unemployment rates, and high labour force participation among those in the core working ages of 25 to 54. The unemployment rate of the population in the core working ages was 4.0%, while the labour force participation rate was 87.9% in July 2022.

Recruiting skilled employees was expected to be an obstacle over the next three months for 38.7% of all businesses. In addition, shortage of labour force was expected to be an obstacle for 37.1% of businesses, while retaining skilled employees was expected to be an obstacle for 30.9%.

Of businesses that expect to have labour-related obstacles (shortage of labour force, recruiting skilled employees or retaining skilled employees) over the next three months, 61.8% reported that challenges related to recruiting and retaining staff are more challenging than 12 months ago.

In terms of vacant positions, 8.2% of businesses expect to have more job vacancies over the next three months, relatively unchanged from 8.8% of businesses in the second quarter. However, 21.7% of businesses in accommodation and food services expect to have more vacant positions, over double the proportion of all businesses, in the third quarter.

Majority of businesses anticipate positive average yearly growth over the next three years

72.9% of businesses expect positive average yearly growth over the next three years, with 65.0% anticipating growth ranging from 1% to 15% per year. Meanwhile, 14.6% of businesses anticipate no growth over the next three years. Of these businesses, 34.3% are satisfied with their current level of revenue, while 27.7% do not believe the economic environment can support significant growth.

Interprovincial trade and obstacles

21.4% of businesses either exported goods or services to or imported goods or services from another province or territory over the last 12 months. Meanwhile, 5.7% of businesses did not trade interprovincially due to obstacles in conducting business in another province or territory. Of the businesses that traded interprovincially or reported that obstacles prevented them from doing so, 16.5% cited labour shortages and 15.5% cited geography or distance as being obstacles.

Future outlook

69.4% of businesses reported being either very optimistic or somewhat optimistic about their future outlook over the next 12 months. 

Source: Statistics Canada