Business optimism on the decline

Optimism about the prospects for Canada's economy declined “precipitously” in the last quarter, found a recent survey of senior business leaders conducted for Chartered Professional Accountants of Canada (CPA Canada). 

The CPA Canada Business Monitor (Q2 2022) survey indicates that optimism about the national economy over the next 12 months plunged from 40 per cent in Q1 to just 16 per cent in Q2, with pessimism expressed by more than three times as many people (53 per cent). 

Rising inflation was the top challenge to economic growth identified by those surveyed. It was cited by 29 per cent, with supply chain issues trailing at 14 per cent and no other perceived challenges surpassing the ten per cent mark. 

"Canadian business leaders are now clearly concerned about economic issues whereas, several months ago, the pandemic was top of mind," said David-Alexandre Brassard, CPA Canada's chief economist. "Our results show that 70 per cent of these business leaders say inflation is currently hurting their businesses and 44 per cent expect that to continue for a year or more." 

Survey respondents are less optimistic about the prospects for their own organizations, but not to the same extent seen with expectations relating to the national economy, the survey found. Business optimism shrank to 46 per cent in Q2, down from 64 per cent in opening quarter of the year.

Sixty-one per cent of respondents think that revenues would increase over the next 12 months. While a positive forecast, this is down significantly from 74 per cent surveyed in Q1 who believed that their revenues would increase. Similarly, 45 per cent of those surveyed for the Q2 report thought profits would increase, compared with 63 per cent the previous quarter, and 44 per cent anticipated a climb in employee numbers, down from 56 per cent. 

Beyond inflation, supply chain challenges are also impacting business operations. Survey participants report that supply chain problems negatively affected their businesses in terms of supplier/input availability (71 per cent), their ability to deliver for clients on time (60 per cent) and their overall production capacity/volume (43 per cent).