Canadian companies expect a marked decline in sales
How are businesses and consumers adapting to changing economic conditions?
Canadian companies are forecasting a slowdown in sales amid rising interest rates that are curbing household spending. Businesses also expect inflation to fall, according to the central bank's fourth-quarter survey.
More than a third of businesses (38%) foresee an economic downturn in 2024 — an increase from the previous survey. 61% of consumers also see recession risks, up from 55% previously. There is already a decline in orders compared to last year. Companies expect lower prices for both raw materials and finished products.
That said, business owners in Canada recognize that wage increases are likely to be higher than usual due to cost-of-living adjustments. December 2023 has already seen a sharp increase in hourly wages, the largest in nearly three years.
Interest rate now
The Bank of Canada raised the rate to a 22-year high of 5% last year, and it has remained unchanged since then. Inflation in November was 3.1%, below the 2022 peak but still above the bank's 2% target.
The bank's next meeting, scheduled for Jan. 24, is likely to bring no change. Analysts predict a rate cut in the first half of 2024.
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