April 6, 2021

Brighter days ahead: Results from the Alberta Business Expectations Survey show recent indicators significantly improving

In March, the Business Council of Alberta conducted its third Alberta Business Expectations Survey (BES)—a quarterly tool to assess recent trends in business conditions and economic expectations in the province. This survey captures the perspective of BCA’s strongest asset—our member CEOs—whose expectations play an important role in setting the direction of the provincial economy.

In our previous survey, conducted in December, we concluded that, though things were still bad with a long road to recovery, expectations were not worsening. In some cases, there were even positive signs emerging. Our December survey was conducted in a period where both bad news and good news were dominating the headlines: Alberta was in the midst of a second wave of the virus with renewed restrictions freshly implemented; but at the same time, the federal government had announced two vaccine approvals and the first shipments had already been delivered. Overall, the outlook held steady, and we stated that the worst may be behind us.

Our most recent survey conducted in March further supports this conclusion. This time, it is not just that business expectations held steady; expectations have improved tremendously, with positive results across most key indicators for the first time since the survey’s launch in September. Though there is still a way to go, most businesses are indicating that they can see the light at the end of the tunnel, and now we know it’s not a train.

Survey Results
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 are looking up

It has been a tough year for businesses, and this continues to show in the survey. However, things are starting to turn around. Some businesses have been able to more than make up for initial losses incurred during the early months of the pandemic, and the strength of new business activity is especially encouraging. The vast majority of respondents reported that “forward-looking indicators” —things like new orders, advance bookings, and sales inquiries—have increased compared to 12 months ago. In tandem with this renewed sales activity, businesses have positively adjusted their future sales outlook.

Key Findings
  • About half of respondents reported a slowdown in sales over the previous 12 months, an improvement over the 68% of respondents reporting the same in our December survey.
  • 83% of respondents reported an uptick in forward-looking indicators—things like new orders, advance bookings, and sales inquiries—compared with only about a quarter as of the previous survey.  
  • More businesses expect sales to increase over the upcoming 12-month period: 83% compared with 43% in our December survey.
  • Net, this means a strong positive balance of expectations of 81% for future sales activity, with significantly more businesses expecting sales to increase than the number expecting sales to decrease.

Employment outlook improves

With an improved economic outlook, hiring expectations have also increased. For the first time since we began this survey last September, more respondents plan to increase employment over the next 12 months than the number who plan to employ fewer people. Of course, many businesses have already had to make cuts to their workforce, so the fact that they are looking to hire more workers over the next year does not necessarily mean that overall employment will be higher than it was pre-COVID. Still, the fact that businesses clearly plan to add more workers in the near future is a very good sign.

On the flip side, more businesses are also reporting difficulty filling new positions. This could be due to a multitude of factors. Given the high rate of unemployment currently, this indicates a mismatch between the skills needed by businesses and the skills of those looking for work. Among individuals who have the skills needed, there could be additional constraints or barriers at play—new child care and educational responsibilities or health and safety concerns. This is worthy of additional research to better assess the situation and what can be done to better connect individuals and employers.   

Key Findings
  • Over half (55%) of respondents expect to increase employment over the next year, up from 25% in our December survey. A remaining 30% expect to maintain their current level of employment, and 15% expect to make cuts.
  • 23% of respondents reported labour shortages becoming more of an issue compared with just 7% of respondents as of the last survey. 
  • 36% of respondents reported difficulty finding individuals to fill current openings to meet demand, compared with just 11% as of the last survey.

Investment is also picking up, while liquidity concerns are waning

Business investment drives economic growth and is thus a leading indicator for recovery. In December, we were cautiously optimistic that the worst was over. Our March results confirmed that that was the case. More Alberta businesses now plan to increase their investment in machinery and equipment compared to those who anticipate further reductions.

Meanwhile, access to financing has also improved for the first time since the survey began. There are now more respondents finding it easier to access new lines of credit or to sell bonds over the last three months than those reporting the opposite. However, some businesses remain in precarious financial situations. Though a large improvement over the previous update, about 1 in 5 report it has gotten more difficult to access credit, which is less than ideal in enabling a strong economic recovery.

Key Findings
  • More respondents expect to increase spending on machinery and equipment over the next 12 months (47% of respondents) than those that expect to spend less (just 4%).
  • From December to March, the balance of expectations on investment increased substantially: from -4% to +43%.
  • As far as accessing financing, the balance of payments has also improved considerably, though it is still negative: from -20% to -2%.
  • However, 19% of respondents stated that credit market conditions have tightened versus December. Though a large improvement over the previous update (39% had reported financing conditions had worsened), this could hamper economic recovery.

Summary of Results

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