March 11, 2024

Alberta businesses remain optimistic: Results from the February 2024 Business Expectations Survey

Overall, the province’s economic outlook remains positive. Consistent with our November survey, some businesses are seeing sales slow, and many remain cautious with investment; however, overall results are encouraging. Some notable findings include:

  • 52% of businesses report improvements in forward-looking indicators, a moderate increase from 41% as of November. As such, the balance of expectations increased: from 19% in November to 28% in February.
  • 49% of respondents plan to increase their staffing over the next year, up slightly from 44% in June. Meanwhile, those who continue to hire report it is easier to fill open positions.
  • 37% plan to increase spending on machinery and equipment while 30% plan to spend less. These results remain in line with what we heard in November, as financing continues to be a challenge.

Looking forward, the challenge of labour shortages is likely to continue to subside as employment normalizes, but the cost of financing will remain high. That said, capital investment may be easier to finance as the Bank of Canada considers an interest rate cut, possibly as early as summer. Nonetheless, it will take time for interest rates to return to normal, if they do at all, potentially dampening capital investment longer-term.

About the Survey
Broadly speaking, the BES asks questions in three general categories of business activity: past sales and future expectations; employment and access to labour; and investment plans and credit access. We highlight some of the key findings below.

Where applicable, we use a “balance of expectations” approach to analyzing the data. Effectively, what this means is that we focus on the gap between businesses who think a certain indicator will improve and those who think the opposite. For example, we ask in the survey what businesses expect their employment level to be in the next 12 months: higher, lower, or about the same as it is now. The balance of expectations is the percentage of firms reporting that employment will be higher minus the percentage reporting that it will be lower. The more positive the balance, the more overall optimism we see about future hiring. The more negative the balance, the more pessimism we see.

Sales expectations remain positive

  • Over half (52%) of respondents reported an increase in forward-looking indicators (e.g., new orders, sale inquiries) while the remaining respondents were equally split between reporting no change (24%) or a decrease (24%).
  • As such, Alberta businesses expect strong sales to continue longer term though these expectations are moderating: 52% expect an acceleration in sales over the next year, compared to 60% in November while about 37% expect sales to remain about the same, up from 30% in the previous survey.
  • As a result, the balance of expectations for future sales has continued to moderate but remains positive: 41% in February versus 50% in November.

Labour demand has cooled but remains surprisingly strong

  • Though an impressive 49% of businesses report plans to continue to increase staffing, the need for labour has moderated: 40% of respondents expect current staffing to hold over the next 12 months while 11% expect a decline. This pushes the balance of expectations to 38% in February, up from 26% in November.
  • With many businesses holding the line on staffing, those continuing to hire are finding it easier to fill positions. A strong majority of respondents (75%) report no difficulty in filling positions needed to meet consumer demand.
  • Likewise, 43% of respondents reported labour shortages are less severe compared to a year ago, while just 8% reported they are worse.

Investment plans show caution as financing remains costly

  • Investment plans have largely remained consistent with our November survey, as interest rates remain high: 37% of respondents plan to increase spending on machinery and equipment over the next year (slightly up compared with 28% in November), while 30% plan to reduce spending, leaving a slightly positive balance of expectations.
  • As mentioned in our previous BES, financing remains a notable concern. Over a quarter of respondents (27%) report that conditions for obtaining financing have further tightened over the last few months (in November, this number was 46%), suggesting the increase in the policy rate is still working its way through the economy.
  • On the other hand, the ability to meet unexpected demand is not a concern, with only 9% of businesses responding to significant difficulty in meeting demand.

Summary of Results

Overall, this is encouraging news for Alberta businesses and Albertans, particularly in terms of hiring, which has shown surprising resiliency. On top of that, although sales expectations are softening, they remain robust with most businesses expecting sales to increase over the next year. However, in line with previous expectations, investment expectations remain weak, as high interest rates continue to impact consumer demand and businesses’ capacity to invest in the future. But this could reverse quickly as the Bank of Canada cuts rates. All in all, the results show ongoing optimism from Albertan businesses and the overall strength of the economy.

Explore Insights:

Share This