Bank of Canada surveys show businesses and consumers expect slow economic growth in the coming year
Surveys from the Bank of Canada, reported by The Financial Post, reveal that both businesses and consumers foresee slow economic growth in the coming year.
Businesses have experienced below-average sales growth over the past 12 months and do not expect this trend to improve.
Firms dependent on discretionary consumer spending have faced significant declines in sales in the past quarter, and one-third of these firms anticipate further declines next year as consumers opt for cheaper products or discounts.
Despite this, fewer firms are preparing for a recession, with only 20 percent expecting a significant economic downturn, compared to over 27 percent last quarter.
Among consumers, 51 percent expect Canada's economy to decline over the next 12 months, slightly down from 52 percent last quarter. This economic uncertainty has led many consumers to reduce their spending.
Both groups have shifted their focus to government spending and regulatory tax policies. Businesses now cite taxes and regulations as their top concerns, highlighting red tape and excess regulations as obstacles, and the carbon tax as a major cost factor.
Economic uncertainty and cost pressures also remain significant concerns.
Business investment remains historically low due to the low-demand environment impacting return on investment. However, a slight increase in the number of firms planning to invest in machinery and equipment over the next 12 months has been noted.
Consumers also attribute economic uncertainty to government policy, global tensions, and interest rates.
Consumers expect inflation to stay above four percent in the next year. In contrast, firms' inflation expectations have slightly decreased, now within the Bank of Canada's target range of two to three percent.
Most firms anticipate a decline in the Bank of Canada's policy interest rate by 50 to 100 basis points in the next 12 months, although they still expect high-interest rates to affect their sales outlook.
The labour market has shifted in favour of businesses. Now, 50 percent of consumers report difficulty finding jobs in their field, up from 38 percent a year ago, with newcomers particularly worried about job security.
Businesses are experiencing a significant decline in labour shortages and are reducing hiring plans, with 40 percent not planning to add workers.
