The Bank of Canada’s latest Business Outlook Survey for the fourth quarter of 2024 reveals a subdued business sentiment, with firms starting to foresee improvements in sales activity. Conducted through interviews from November 7 to 27, 2024, the survey highlights expectations of easing cost growth and stabilized selling prices.
“Overall business sentiment remains subdued, but firms are beginning to anticipate improvements in sales activity,” states the report. The optimism is largely attributed to recent interest rate reductions and the anticipation of further cuts.
Businesses are seeing lower financing costs and improving demand outlooks as opportunities to resume previously postponed investment plans. However, most firms report having spare capacity, resulting in modest hiring plans. “Binding labour shortages are not widespread,” according to the survey, with improved availability of outside labour compared to a year ago.
The report notes that growth in firms’ selling prices has stabilized while growth in wages and other input costs continues to ease. Inflation expectations have slightly increased but remain within the Bank of Canada’s target range.
Uncertainty regarding the new US administration is prevalent among Canadian businesses, with concerns about higher input costs due to trade tensions. “Firms were also asked…about the expected impact of the new US administration on their business,” with 40% anticipating negative effects primarily through increased input costs.
Despite soft demand conditions persisting, some signs of improvement are evident as businesses anticipate better demand conditions ahead. Indicators such as order books and advance bookings show a positive shift compared to last year.
Investment intentions have become more widespread among firms, reflecting improved borrowing conditions and demand outlooks. Nevertheless, uncertainty related to US trade policy continues to hold back some investment plans.
Labour market conditions have eased, leading businesses to expect slower growth in labour costs over the coming year. Firms anticipate their selling prices will grow at a similar rate as over the past year due to improved demand allowing for cost pass-throughs.
Inflation expectations remain slightly above last quarter’s levels but within acceptable limits set by the Bank of Canada. Concerns about potential US tariffs impacting inflationary pressures were noted by some firms.
In particular sectors like oil and gas, expanding export infrastructure is seen as supporting future production growth. Recent developments such as the Trans Mountain Expansion pipeline and LNG Canada’s Phase 1 launch contribute positively to this outlook despite price volatility and tariff uncertainties.
Survey results reflect opinions expressed by respondents rather than official views from the Bank of Canada. The Business Outlook Survey involves interviews with senior management from approximately 100 firms representing Canada’s GDP composition, while the Business Leaders’ Pulse surveys 700-1,000 Canadian business leaders monthly online.
