Businesses see tough year ahead
While not all businesses have struggled because of the pandemic and oil price crash, the majority expect their sales growth and capital spending to suffer over the coming year
By ATB Economics 7 July 2020 1 min read
The Bank of Canada’s latest Business Outlook Survey* finds that business confidence has nosedived due to COVID-19, but is not quite as low as it was during the 2007-09 global financial crisis.
The Bank’s business sentiment indicator fell to -8.25 at the end of 2008 compared to -7.0 as of the second quarter of 2020. The indicator was sitting at 0.82 at the end of 2019.
The negative effects of the pandemic and oil price crash are expected to linger with 63 per cent of the firms surveyed anticipating slower sales growth over the next 12 months. “Weakness is most prevalent among firms in tourism-dependent, finance and real estate industries as well as those linked to commodities, particularly energy.”
Over half (55 per cent) of businesses said the pandemic has reduced their capital spending budgets with many “limiting spending to the maintenance of existing equipment.”
The pandemic appears to be accelerating investment in digital capacity. “Businesses that intend to increase their capital expenditures often cited doing so to support their digitalization strategy or productivity improvements, sometimes in the context of staff working from home.”
On the employment front, the good news is that 40 per cent of respondents expect to have more employees over the next 12 months than they did over the past 12. The bad news is that 18 per cent expect to have a lower level of employment.
Overall, while not all businesses have struggled because of the pandemic and oil price crash, the majority expect their sales growth and capital spending to suffer over the coming year.
*The Business Outlook Survey summarizes interviews conducted by the Bank’s regional offices with the senior management of about 100 firms selected in accordance with the composition of the gross domestic product of Canada’s business sector. This survey was conducted by phone and video conference from May 12 to June 5, 2020.