Businesses brace for rising profit pressures

Inflation, supply challenges and labour shortages are all weighing on Canadian businesses. As a result, almost a third expect profits to decline in the months ahead, according to Statistics Canada.

The latest survey of business conditions, which was carried out between April and early May, found that firms are girding to face a variety of headwinds in the months ahead, including rising costs, employment issues and supply disruptions.

“Many businesses that were facing challenges maintaining inventory levels or acquiring inputs, products and supplies, either domestically or abroad, expected these challenges to worsen in the short term,” it said.

Almost one third (29.5%) expected their profits to decline over the next three months. Just over half (52.5%) anticipated that profitability will remain relatively unchanged, while just 15.3% saw their profits rising.

Expectations varied widely by industry.

For instance, almost half (49.3%) of businesses in the accommodation and food services sector expected profits to drop, whereas 23.9% of businesses in the arts, entertainment and recreation sector said their profits will rise.

Looking ahead, over half (55.2%) of businesses said the rising cost of living will become a bigger issue when negotiating employees’ wages over the next 12 months — led by the accommodation and food services sector (76.1%).

In the face of rising energy costs, businesses also planned to raise their own prices (56.8%), reduce energy consumption (18.7%), invest in energy-efficient technologies (8.8%) and curb input purchases (8.0%).

Staff

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