Canadian businesses share outlook on economy, it's not great

Two reports suggest the Canadian economy will remain weak in the near term

Canadian businesses share outlook on economy, it's not great
Steve Randall

Canadian businesses are not feeling optimistic about the near term outlook for the economy, according to two separate polls.

CPA Canada’s Q4 Business Monitor survey draws on responses from 250 professional accountants in leadership positions in privately and publicly held companies. It found that they are more than three times as likely to express pessimism (50%) about the Canadian economy than optimism (16%) with around one third neutral (34%).

Interest rates are viewed by 91% of respondents as having a negative impact on the Canadian economy and 71% say they are having a negative impact on their own company. Inflation is hurting 73% of poll participants’ businesses and six in ten say this is likely to be the case for at least the next six months.

“Our survey results suggest that regardless of whether or not we are in a technical recession, the perception among top business leaders is of worsening conditions for the Canadian economy,” says Rosemary McGuire, Vice-President, Research, Guidance and Support at CPA Canada.

Despite the pessimism, 63% expect increased revenue over the next year, 54% expect higher profits, and 37% anticipate a climb in employee numbers (47% say they have fewer employees than their company needs, while 24% believe they have more than needed).

Private investment weaker

Meanwhile, the Canadian Federation of Independent Business also sees a sluggish near term outlook for the Canadian economy.

Its Main Street Quarterly report forecasts growth of 0.5% in Q1 2024 following a flat Q4 2023 (-0.2%) with CPI stable with fewer firms hiking prices or doing so by smaller margins than in previous post-pandemic years.

Private investment plans are at their lowest level ever, having severely dropped by 12% compared to Q3.

“This is mainly driven by very low long-term small business confidence,” said CFIB's chief economist and vice-president of research Simon Gaudreault. “Business owners who are feeling rather pessimistic about their future due to general uncertainty, various cost pressures and tax increases weighing on them are significantly less likely to invest in their business.”

The analysis reveals mixed signs of how businesses are doing with sales and employment generally positive while investment and optimism is weak.

“Current forecasts point to a short-lived contraction of the overall economy, with a return to positive growth in early 2024,” added Gaudreault. “A real recovery for the small business sector should arrive much later given the enduring poor business environment.”

He added that with the analysis showing inflation is now close to the BoC’s target, it should consider less restrictive policy from the spring.