Businesses and Consumers Expect Economic Slowdown, Bank of Canada Surveys Show
The Bank of Canada has released surveys indicating that both businesses and consumers expect a slowdown in economic growth over the next year. This expectation is reflected in various metrics, including sales growth, investment, and inflation.
Businesses Report Below-Average Sales Growth
- According to the survey, businesses have reported below-average sales growth over the last 12 months.
- Firms that rely on discretionary spending from consumers have seen the biggest decline in sales in the past quarter.
- One-third of those firms expect declines in the next year, with many consumers deciding to purchase less expensive products or seeking discounts.
Consumers Expect Economic Decline
- A significant portion (51%) of consumers surveyed expect Canada’s economy to decline over the next 12 months.
- This uncertainty has prompted many consumers to scale back their spending.
- Both consumers and businesses have shifted their focus this quarter to government spending and regulatory tax policies, respectively.
Businesses and Consumers Cite Uncertainty as Top Concern
- The number of businesses citing taxes and regulations as their top concern jumped this quarter, with firms singling out red tape and excess regulations for slowing their plans and taxes — predominantly the carbon tax — for hiking their costs.
- Uncertainty around the economy and cost pressures also remained top concerns.
Business Investment Remains Low
- Business investment has remained at historic lows, with many firms seeing the low-demand environment weighing on their return on investment.
- However, there was a slight increase in the share of firms who will make investments in machines and equipment over the next 12 months.
Inflation Outlook Elevated
- The inflation outlook among consumers remains elevated, with many expecting price growth to remain above four per cent in the next year.
- But firms’ expectations of inflation fell slightly in June, landing in the Bank of Canada target range of two to three percent.
Labour Market Shifts in Favour of Businesses
- Both the Business Outlook Survey and the Canadian Survey of Consumer Expectations suggest that the labour market has shifted in favour of businesses over consumers.
- Fifty per cent of consumers now say it has become harder to find a job in their line of work, up from 38 percent a year ago.
Recommendations for Businesses
- To navigate this uncertain economic landscape, businesses should prioritize investments in machines and equipment that can help them stay competitive and adapt to changing market conditions.
- Firms should also focus on improving their labour productivity to offset potential future job losses.
Conclusion
The Bank of Canada’s surveys provide valuable insights into the expectations and concerns of both businesses and consumers. By understanding these trends, businesses can better position themselves for success in a potentially slowing economy.
