Analysis: Rough waters ahead for Canada's businesses

This would likely have a considerable impact on consumer power

Analysis: Rough waters ahead for Canada's businesses

Canadian businesses are bracing for inflationary pressures and slower growth for the foreseeable future, according to RBC Economics.

The Q3 edition of the Bank of Canada’s Business Outlook Survey found that Canada’s businesses will have to weigh their growth outlooks against key production constraints.

“Businesses on balance expect future sales to worsen over the next 12 months,” RBC said in its analysis of the BoC survey. “Many of them anticipate an economic downturn (over half put the odds of a recession within the next year at more than 50%), with those that have sales linked to housing activity and household consumption expecting a bigger impact.”

This unease will likely have a domino effect on Canadians’ purchasing power.

“Faced with growing uncertainty, businesses have adjusted their investment and hiring intentions downward, and expect slower (but still-elevated) wage growth,” RBC said.

Read more: Canada inflation sets stage for rate increase

However, while capacity issues like supply chain bottlenecks and labour shortages have exhibited some signs of improving in Q3, RBC stressed that “price pressures currently are still too high and broad to reverse quickly.”

“We don’t expect the Bank of Canada to ease off the monetary policy brakes until policymakers are confident that inflation will slow substantially and sustainably.”

RBC said that it is expecting a 50-basis-point hike in the central bank’s policy rate announcement later this week.