July 3, 2024

Strong reasons for optimism: Results from the June 2024 Business Expectations Survey

Overall, the province’s economic outlook remains firmly positive. While we expected hiring to cool off, businesses continue to report plans to increase staffing to meet growing consumer demand. Some notable findings include:

  • 63% of businesses report improvements in forward-looking indicators, a moderate increase from 52% in February. As a result, the balance of expectations increased from 28% in February to 56% in June.
  • 81% expect sales to accelerate over the next year while few expect to see a decline. This brings the balance of expectations to 78%, up from 41% in February.
  • 67% of respondents plan to increase their staffing in the next year, up from 49% in February. However, those who are hiring report that labour shortages continue to restrict their ability to meet demand.

Also of note, though investment plans remain modest for now, capital investment will become easier to finance if the Bank of Canada continues to cut interest rates. 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 overwhelmingly positive

  • Almost two-thirds (63%) of respondents reported an increase in forward-looking indicators (new orders, sale inquiries, etc.) while very few reported a deterioration (7%).
  • As such, Alberta businesses expect strong sales to continue: 81% expect an acceleration compared to 52% in February, while only 3% expect sales to slow.
  • This represents a continuation of strong growth. The majority of respondents (61%) reported that sales have grown over the last year.

Labour demand remains surprisingly strong

  • An impressive two-thirds (67%) of businesses plan to increase staffing over the next year, up from 49% in February. Meanwhile, 24% expect current staffing levels to hold. This leaves the balance of expectations at 58%, up from 38% in February.
  • Labour constraints continue to be an issue. 61% of respondents report that labour shortages are restricting their ability to meet demand, up from 25% in February. This is a sizeable change, flipping the balance of expectations back to negative territory. We are cautious not to read too much into any single survey or question, so our next survey in November will shed more light on whether this is a real shift or a blip.
  • That said, businesses report that, overall, the issue is better than it was a year ago. Around 40% of businesses say that labour shortages are less intense than they were last year, in line with our February survey.

Investment plans show caution as financing remains costly

  • Planned spending on capital investment remains limited with a balance of expectations of 9%, similar to its level in February. In other words, a roughly even number of businesses say they will increase spending as those who are expected to cut spending.
  • Meanwhile, access to financing has improved. The balance of expectations is out of negative territory for the first time since 2021. Around 27% of respondents reported conditions eased over the last three months, up from 14% in February.
  • Many businesses report that they would face some difficulty in meeting an unexpected increase in demand, suggesting businesses are operating at, or near, full capacity.

Summary of Results

Overall, this is encouraging news for Alberta businesses and Albertans, particularly in terms of hiring and sales expectations as the strength of the Canadian economy wanes. With the Bank of Canada expected to decrease interest rates further this year, we are likely to see further improvement in financing and investment plans as well.

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