The Canadian Chamber of Commerce Business Data Lab (BDL) has released its Q2 Canadian Survey on Business Conditions Report, indicating a positive shift in business sentiment following the Bank of Canada's recent interest rate cut.
The BDL’s Business Expectations Index rose to 101.8 in the second quarter of 2024, marking its first positive territory in a year, driven by an optimistic outlook for sales.
Businesses anticipate an increase in hiring in the coming quarter as the labour market shows signs of balancing supply and demand more effectively. Stephen Tapp, Chief Economist at the Canadian Chamber of Commerce, expressed optimism about the improved sentiment across various sectors, noting a better sales outlook and ongoing recruitment efforts. "In a challenging economic context, this is good news from Canadian businesses," said Tapp. However, he cautioned about potential disruptions from labour disputes that could impact rail transportation, ports, and border operations, exacerbating supply chain issues.
The report indicates that while business challenges are generally easing in an environment of below-trend growth, cost-related pressures persist. Tapp pointed out that despite a slowdown in headline inflation, many companies still expect to raise prices. "This is something the Bank of Canada will be watching closely. If these cost pressures are sustained — especially for wages — this could delay future interest rate cuts," Tapp said.
Regional disparities in business sentiment are evident, with Atlantic Canada (107.6) and Quebec (105.0) showing the strongest optimism, led by Halifax. Conversely, Saskatchewan (93.2), Manitoba (98.1), and Ontario (99.1) reflect the weakest sentiment, with Toronto continuing to struggle. Sector-wise, the finance and insurance industry leads with a robust index of 110.9, followed by construction at 106.9. In contrast, agriculture (96.0), information and culture (98.1), and transportation (98.7) are contracting.
The struggles of micro firms (one to four employees) seem to be stabilizing with an index of 99.6, while medium- and large-sized firms (100 or more employees) maintain a more optimistic outlook with an index of 106.8.
The full report is available from the Canadian Chamber of Commerce for more detailed insights.