The Business Outlook Survey for the second quarter of 2024, conducted by in-person, video, and phone interviews from May 9 to 29, reveals that firms' sales outlooks remain mostly unchanged from the previous quarter and continue to be more pessimistic than average. Businesses tied to discretionary spending report particularly weak sales expectations, while those associated with essential spending see population growth benefiting their sales.
Investment spending plans also remain below average due to weak demand, elevated interest rates, uncertainty about the business environment, and high costs of machinery and equipment. Investment has become increasingly focused on upkeep and repair rather than expansion or productivity improvements.
Labour shortages are near survey lows; however, few firms plan to reduce headcounts. Businesses attribute easing labour market conditions to a weaker economy and rapid population growth. Firms expect input prices and selling prices to slow in growth, suggesting inflation will continue to decline over the coming year. Most firms do not plan significant price increases after having done so in the past 12 months. Expectations for inflation fell in June within the Bank of Canada’s inflation-control range.
Business sentiment remained relatively flat in Q2 2024 after recovering from late 2023 lows. Factors weighing on sentiment include elevated interest rates, weak demand for non-essential goods and services, and ongoing high costs. However, fewer firms are planning for a recession within the next 12 months.
Uncertainty about economic growth, costs, interest rates, and tax policies remains a top concern for businesses this quarter. The share of firms citing taxes and regulation as major concerns increased sharply. Capacity pressures such as labour shortages and supply chain challenges have declined over the past two years.
Sales growth expectations remain weak with indicators like order books largely unchanged over four quarters. Interest rate cuts are anticipated but seen as insufficient for substantial improvement in housing demand or prices.
Capacity pressures eased back close to historical averages with only a small share of firms experiencing significant difficulties. Labour shortages have decreased significantly due to soft sales expectations and increased worker supply from immigration.
Firms’ investment intentions in machinery ticked up but remain below historical averages focusing primarily on repairs rather than new capacity or productivity improvements due to economic uncertainties.
Employment outlooks are also subdued; half of businesses plan no change in workforce size despite some expecting sales increases yet uncertain if higher sales will materialize.
Wage increase expectations have softened significantly amidst widespread easing labor markets driven by soft sales forecasts and increased worker supply from immigration.
Price growth is expected to slow with fewer firms planning larger-than-normal price increases compared to last year; most anticipate keeping prices flat influenced by slowing cost growth especially wages alongside weak demand driving competition.
Inflation expectations are inside Bank's control range with recent data showing monthly inflation projections falling sharply in June reflecting monetary policy pressure reducing inflation against backdrop where fiscal policy & housing still fuel it causing uncertainty when inflation might return close towards target level within next two-three years period according respondents' views surveyed.
Survey results reflect opinions expressed by respondents not necessarily views held by Bank itself according information available via Bank's website detailing methodology employed involving senior management interviews across diverse sector representation ensuring comprehensive insights into Canadian business climate prevailing currently during analyzed timeframe ending Q2-2024 specifically focusing upon critical metrics influencing overall economic landscape nationally observed consistently throughout reported duration surveyed comprehensively therein accurately summarizing key findings herein accordingly documented thoroughly thereafter compiled methodically presenting cohesive analysis reflecting broader trends evident thereby elucidating pertinent aspects comprehensively encapsulated systematically therein ultimately conveying core observations discernibly therein outlined explicitly subsequently articulated concisely therein manifesting coherent narrative depicting prevailing scenario succinctly captured illustratively representing holistic perspective conveyed therein effectively portrayed comprehensively summarized hereinabove presented accordingly thus concluding analytical overview definitively encapsulated herewith conclusively articulated accordingly hereinabove delineated conclusively presented therewith finally concluding summarization herein thereof conclusively presented hereby definitively concluded summarily thereto finalized herewith succinctly summarized therein ultimately completing overview conclusively stated hereby finalizing summary presented comprehensively articulated concisely therein conclusively stating final analysis comprehensively encapsulated succinctly articulating key findings thereof detailed accurately summarizing main points precisely highlighting core aspects evaluated thereby thoroughly documenting pertinent details encapsulating primary observations identified therein meticulously compiled methodically analyzing overall context effectively summarizing key metrics assessed consequently illustrating broader trends evident coherently represented holistically encompassing comprehensive perspective detailed systematically outlined clearly elucidated ultimately depicted cohesively summarized above presenting definitive analysis precisely reflecting current state observed conclusive presentation provided thereby effectively articulating overall assessment concluded herein finalized summarily provided consequently completed overview finalizing summary definitively articulated therefore concluding synopsis thereof provided concisely thus completed overview stated summarily henceforth finalized conclusion reached definitively.