Survey Insights on Business Conditions

Short-term business sentiment declined in Canada in the third quarter of 2024. The BDL’s Business Expectations Index registered a disappointing 98.4, down 3.4 points from last quarter, with weaker outlooks for sales and employment dragging down the headline number.

The good news, however, is that with the economy still growing and the Bank of Canada increasingly winning the war against inflation, businesses expect a “soft landing” with employment growing over the next three months ─ albeit modestly. Equally important, this survey reveals new evidence that cost pressures are moderating, and firms’ pricing behaviour is normalizing. The central bank has been watching this closely. If these improvements continue, this trend could eventually hasten more aggressive interest rate cuts to support the weak economy.

Looking across the country, the outlook is definitely gloomy in Ontario and British Columbia ─ particularly their major cities of Toronto and Vancouver, where high housing prices and associated debt levels, along with impending mortgage renewals, are weighing heavily on consumer spending. Conversely, businesses are more optimistic in Quebec and Atlantic Canada, markets that haven’t suffered as much with housing affordability challenges.

The potential for ongoing disruptions to vital supply chains ─ from labour disruptions to transportation networks in rail, ports or airlines ─ is a wildcard that businesses are increasingly worried about. A rising share of exporters expect supply chain obstacles to worsen in the near term.