There appear to be a few glimmers of light as clouds gather on the horizon for Canada’s economy.
While Canadian businesses expect an economic downturn in the coming year, 69 per cent say they are prepared to face it, according to a new study by the Business Development Bank of Canada.
The BDC surveyed 1,500 small and medium-sized business owners across Canada to determine their level of confidence in the economy, their prospects and investment plans for the year ahead.
The study reveals that while most businesses are concerned about a coming downturn, most (88 per cent) are profitable and 45 per cent say they expect to stay that way as the economy slows.
Overall the survey gives the impression of a business community that is in pretty good shape to meet the challenges ahead. Seventy-five per cent say they are comfortable with their company’s level of debt, and more than half, 54 per cent, say they could take on more.
That’s not to say they aren’t facing extraordinary challenges. Rising costs from inflation not seen in decades have not only squeezed Canadian consumers, it has also turned up the heat on businesses as well.
Forty-seven per cent of the businesses surveyed rank inflation as their biggest challenge.
Significantly — especially to central bankers anxious to keep inflation expectations in check — most don’t see that problem changing any time soon. While 26 per cent of businesses think we are in the worst of inflation now, 52 per cent say the worst is yet to come.
And it’s not rising interest rates that are proving the biggest pain in businesses’ bottom lines, but energy costs, with 51 per cent saying these are the biggest external obstacle they face. Interest rates come second at 39 per cent and salaries third at 38 per cent.
There is concern though about how higher interest rates will affect sales. At this point 54 per cent of businesses say rising rates have had no effect on sales. But 55 per cent expect higher borrowing costs will decrease their sales over the next 12 months.
It’s a concern that also appears in a November survey by the Canadian Federation of Independent Business. In its latest Business Barometer optimism for the year ahead sank to its lowest since the Great Recession in 2009.
“Small businesses are feeling the pinch of a slowing economy and higher than ever costs of doing business and for many the usual boost they expect to see from holiday sales is not looking as promising this year,” said Andreea Bourgeois, CFIB’s director of economics.
The CFIB survey, however, found that overall 38 per cent of businesses say they are in good shape and only 18 say they are in bad shape.