Despite ongoing cost pressures, and the prospect of many businesses passing along the impact of tariffs to their customers in the coming year, new data from Statistics Canada shows that optimism persists among Canadian businesses.
The latest edition of the survey on business conditions for the fourth quarter, found that over half (61.2%) of companies are anticipating cost-related challenges in the next three months — including inflation, rising input costs, higher debt and interest costs, and elevated real estate costs.
In particular, the survey, which was which was conducted in October and November, found that 41.1% of businesses said that they expect inflation to be an obstacle during the quarter, followed by recruiting skilled employees (26.4%).
The concern about inflation comes as data show that the prices of raw materials and labour costs accelerated in October — although worries about financing costs have eased a bit. While 22.9% said that they expect debt and interest costs to pose a challenge in the next three months, that’s down from 24.8% in the previous survey, as the Bank of Canada has continued to cut interest rates.
Additionally, the survey found that 39.9% of businesses reported that they were either “very likely” or “somewhat likely” to pass tariff-related cost increases onto their customers in the next 12 months, Statistics Canada reported.
Another 31.4% said they don’t expect to hike prices due to tariffs, with the remaining 28.8% saying that they were unsure, or unlikely to pass along tariff costs in the year ahead.
Escalating trade tensions have also impacted sales, particularly in the retail sector, where Statistics Canada found that just over half (50.5%) of companies reported that they have shifted their marketing over the past six months to promote Canadian products. The trend was also evident in the accommodation and food services sector (33.1%), and in the manufacturing industry (27.4%).
In addition, the survey found that almost a third (30.3%) of businesses in the retail sector reported an increase in sales of their Canadian products, along with 22.2% in manufacturing and 22.1% in wholesale trade.
Against that backdrop, business optimism was virtually unchanged in the fourth quarter, with 66.3% of businesses saying that they are “very” or “somewhat” optimistic about their outlook for the next 12 months, compared with 66.7% in the previous survey.
Wages are also expected to hold up in this environment, with 39.3% of businesses reporting that they expect their average wages to increase over the next 12 months, and 44.5% expecting average wages to stay the same.