Survey Insights on Business Conditions

With the Bank of Canada kicking off the monetary policy easing cycle among G7 countries, we may be seeing the first green shoots of business optimism in Canada. The BDL’s Business Expectations Index moved into positive territory for the first time in a year, hitting 101.8 in the second quarter of 2024, driven by a brighter outlook for sales. Encouragingly, businesses are still looking to hire in the coming quarter, as the labour market comes into better balance between supply and demand.

Looking across the country, Atlantic Canada and Quebec are leading business optimism, with Halifax topping our city rankings. Conversely, Central Canada is lagging behind in Saskatchewan, Manitoba and Ontario, with cities such as Toronto and Regina struggling. Most industries have an improving outlook for the coming quarter, led by finance and insurance, while agriculture and information and culture are contracting. By size,micro firms (with 1 to 4 employees) are finally stabilizing after years of significant challenges throughout the pandemic; larger firms remain more optimistic.

Business obstacles are generally improving, but cost-related pressures remain widespread. And despite the slowdown in headline inflation, the share of companies expecting to raise prices remains historically elevated – which if sustained, could slow future interest rate cuts. With rates now coming down, businesses’ financing concerns are easing, although micro firms are still grappling with debt constraints.

Labor challenges ticked up this quarter, especially for firms facing tight market conditions in accommodation and food services, construction and healthcare. Such labour issues are leading to longer work hours and slower business growth. Finally, as we look ahead to a summer that could bring several disruptive labour disputes across the country (e.g., for the rail network, ports and at the border), impacted firms are unfortunately expecting supply chain obstacles to worsen in the near term.