Canadian businesses continue to navigate a challenging economic landscape, with cost-related obstacles remaining a significant concern in the third quarter of 2024. According to the latest Canadian Survey on Business Conditions released by Statistics Canada, while the proportion of businesses expecting cost-related challenges has decreased slightly, these challenges remain at the forefront of business concerns.
The report highlights that 67.6% of businesses anticipate facing cost-related obstacles in the coming months. This includes pressures from rising inflation, which 50.2% of businesses identified as a major challenge. Despite a slight easing in consumer inflation, which stood at 2.7% in June 2024, businesses in sectors like accommodation, food services, and retail trade are particularly concerned about the rising costs of inputs and inflation.
Interest rates and debt costs also weigh heavily on businesses, with over one-third expecting these factors to pose significant challenges. The survey found that high interest rates and debt costs are particularly problematic for industries such as agriculture, transportation, and retail trade.
Despite these obstacles, the outlook among Canadian businesses has gradually improved since late 2023. Over three-quarters (76.7%) of businesses report being optimistic about their future prospects over the next year, marking an increase from the previous quarter. This optimism, however, comes with tempered expectations regarding sales growth, as fewer businesses anticipate an increase in sales compared to earlier in the year.
Looking further ahead, nearly half of the businesses surveyed expect moderate revenue growth of 1% to 5% annually over the next three years, with sectors like retail trade and real estate showing the most optimism.
In terms of financial health, a majority of businesses (73.7%) do not plan to seek additional debt financing in the near term, and 57.3% are confident in their ability to repay existing debts on time. However, about 22.2% of businesses reported being unable to take on more debt, citing unfavourable interest rates and cash flow issues as primary concerns.
On the environmental front, two-thirds of businesses reported having environmental practices in place, with waste reduction and energy conservation being the most common initiatives. However, a significant portion of businesses, 32.4%, plan to implement new environmental practices within the next year.
Interestingly, cybersecurity remains a lower priority for most Canadian businesses. While 22.2% plan to enhance their cybersecurity measures in the next 12 months, more than half reported no plans to take additional steps, primarily because they believe they do not need them.
While businesses continue to grapple with inflation, interest rates, and other economic pressures, their outlook for the future shows signs of resilience and growth, albeit with measured expectations. As businesses plan for the future, their focus on environmental practices and selective investment in cybersecurity will likely shape their strategies in the coming years.