Since first learning of the amazing (and free to access for your use!) work being done at the Canadian Chamber’s Business Data Lab, we have enjoyed a constant stream of insights that we find provide helpful context as we work and plan.
The Data Lab’s Q3 2024 report provides an in-depth look at the challenges and trends shaping the Canadian business landscape. With a strong focus on small and micro businesses, this report captures the current sentiment of business leaders, offers an outlook on future expectations, and highlights the key obstacles that businesses must navigate. This report, however, isn’t quite as optimistic as the last one we shared with you here on the blog, but it does signal a decent level of grounded optimism for the future.
As we dive into the findings, it’s important to remember that in Canada, small businesses—defined as those with fewer than 100 employees—represent 97.9% of all employer businesses. Micro businesses, with 1 to 4 employees, are a significant portion of this, making up 55.3% of all small businesses, while 73.9% of businesses employ fewer than 10 people. These numbers underline the importance of micro businesses within the overall small business ecosystem in Canada. Understanding the challenges faced by these businesses is crucial to ensuring they remain resilient and competitive. These figures are also closely reflected in our membership database at the Oshawa Chamber.
1. Business Sentiment Declines, but Long-term Optimism Remains
The Business Expectations Index for Q3 2024 registered a modest decline, sitting at 98.4, down by 3.4 points from the previous quarter. This drop reflects weaker expectations for sales and employment, particularly in major provinces like Ontario and British Columbia. Yet, despite short-term pessimism, businesses are increasingly hopeful about the longer-term future, with optimism for the next 12 months reaching its highest point in three years.
The decline in sentiment is influenced by several factors, including persistent inflation, cooling consumer demand, and challenges in the labour market. However, the report also highlights positive trends, such as the growing expectation for a “soft landing” as inflation moderates, which has led to some interest rate reductions and signals for further cuts in the coming months.
2. Geographic Disparities in Business Outlook
The Q3 report shows a striking difference in business sentiment across Canada’s regions. Quebec and Atlantic Canada are leading the way, with Business Expectations Index scores of 102.6 and 102.5, respectively. Halifax, in particular, stands out as one of the most optimistic cities.
On the other hand, Ontario and British Columbia are struggling, with Toronto and Vancouver facing significant challenges due to high housing costs and the burden of impending mortgage renewals. These financial pressures are hampering consumer spending and contributing to a more subdued business outlook. Ontario’s index dropped to 96.3, while British Columbia posted an even lower score of 94.7.
3. Sector-Specific Trends: Bright Spots and Challenges
Among the 16 sectors analyzed, only four are showing signs of improvement. The finance and insurance sector leads with a score of 110.1, buoyed by continued demand for financial products and services. Health care and professional services also remain relatively strong which is excellent news for those of us in the Greater Oshawa/Durham Region where health care remains a strong and growing sector.
Conversely, sectors such as transportation and warehousing (88.1), agriculture (90.3), and wholesale trade (90.9) are experiencing declines. Micro businesses, in particular, are feeling the pressure, with an overall sentiment score of 95.3, significantly lower than larger firms.
For small and micro businesses, the report underscores the importance of adapting to changing market conditions. Businesses must continue to invest in new technologies, streamline operations, and explore new markets to remain competitive.
4. Labour and Cost Challenges Easing, but Still Prevalent
Labour shortages and rising costs remain the top concerns for Canadian businesses. However, there is a silver lining: these pressures have eased slightly over the past year. The share of businesses expecting labour challenges, such as difficulty recruiting and retaining skilled workers, has decreased. Larger businesses continue to face the most significant hurdles, particularly in industries like accommodation and food services, manufacturing, and construction.
Similarly, inflation-related pressures are showing signs of easing, as businesses report fewer plans to increase prices in the near term. In Q3 2024, only 20% of firms expected to raise prices, down from 24% in the previous quarter.
5. Supply Chain Obstacles: An Ongoing Concern
While labour challenges may be subsiding, supply chain disruptions remain a significant obstacle for Canadian businesses. A rising share of exporters expects supply chain issues to worsen in the coming months, especially as global trade networks face continued disruptions in transportation, rail, and port systems.
Businesses involved in exporting goods are particularly concerned about delays, increased costs, and difficulty in sourcing inputs from both domestic and international suppliers. This is a trend that micro businesses must watch closely, as they may have less flexibility to absorb these disruptions.
6. Optimism Among Underrepresented Business Owners
One of the more encouraging findings from the Q3 report is the strong optimism among Indigenous-owned and women-owned businesses. Indigenous businesses posted a Business Expectations Index score of 104.2, while women-owned businesses scored 103.5. These numbers indicate growing confidence in future opportunities.
On the flip side, businesses owned by visible minorities and immigrants are less optimistic, with scores of 91.9 and 92.2, respectively. These disparities point to the need for targeted support to ensure all business owners can thrive in the current economic climate.
7. Looking Ahead: Preparing for a Soft Landing
While the Q3 2024 report highlights several challenges, it also signals potential for improvement in the near future. With inflation moderating and the Bank of Canada poised to continue their easing of interest rates, there is hope that Canadian businesses can achieve a “soft landing” rather than a full-blown recession.
Small and micro businesses should focus on building resilience by adopting new technologies, improving supply chain efficiency, and diversifying their customer base. These strategies will be essential for navigating the uncertainties of the next few months.
As we look ahead, the Canadian Chamber of Commerce will continue to monitor these trends, providing timely data and insights to help businesses make informed decisions.
Final Thoughts for Small Business Owners
For small and micro businesses, the Q3 2024 report offers both caution and hope. While short-term sentiment is less than ideal, the long-term outlook is brighter. Businesses that can adapt to the changing landscape by focusing on innovation, employee retention, and financial management will be well-positioned to weather the storm.
If you’re a small or micro business operator, here’s another reminder that you don’t have to go it alone! At the Greater Oshawa Chamber of Commerce, we understand the unique challenges our small business members face. Whether you’re grappling with supply chain disruptions, labour shortages, or rising costs, we’re here to provide the support, resources, and advocacy you need to succeed. You can also come out to any number of our upcoming networking and/or learning events to grow your network and build out your business skillset.
Stay tuned for more updates and insights in our next quarterly report, and remember: resilience is key.
(If you missed the link above to download the report, you can access it now ungated RIGHT HERE.)
