Real gross domestic product rose 1.1% in February, the most significant monthly growth rate since March 2021. Inflationary pressure remained in April 2022, when the Canadian Consumer Price Index (CPI) rose 6.8% year over year, a slight increase from March 2022 (+6.7%). After surging by nearly 340,000 in February, employment rose by an additional 73,000 in March as Omicron-related restrictions eased and was little changed in April. After reaching a record low of 5.3% in March, the unemployment rate edged down 0.1 percentage points to 5.2% in April.
From April to early May 2022, Statistics Canada conducted the Canadian Survey on Business Conditions. The survey collects information on the environment businesses are currently operating in and their expectations moving forward.
More businesses expect to raise prices over the next three months compared with the first quarter of 2022
The CPI rose 3.4% on an annual average basis in 2021, following an increase of 0.7% in 2020. In April 2022, Canadian consumer prices rose 6.8% year over year following a 6.7% increase in March. This was the most significant increase since January 1991 (+6.9%). Currently, 39% of businesses expected to raise prices within the next three months, a continued increase from 25.9% of companies in Q4 2021 and 35.7% in Q1 2022. In manufacturing, 60.3% expected to raise prices over the next three months.
Over half (52.5%) of businesses expected profitability to remain relatively unchanged. Nearly 3 in 10 (29.5%) expected their profitability to decrease over the next three months, while 15.3% expected their profitability to increase.
Over three-quarters (76.9%) of businesses expected to retain the same number of employees over the next three months, similar to 77.8% during the first quarter of 2022. Conversely, 5% of businesses expected their employees to decrease, down from 8.1% in the first quarter. In accommodation and food services, 8.3% of companies expected a decrease in the number of employees over the next three months.
Businesses have recruitment, retention, and training plans to address workforce-related obstacles
Businesses have been facing obstacles related to the workforce. The labour force participation rate—that is, the share of the population aged 15 and older who are either employed or unemployed—was 65.3% in April 2022. Excluding a dip in January 2022, the participation rate has hovered around its pre-COVID-19 February 2020 level since September 2021. Recruiting skilled employees was expected to be an obstacle over the next three months for 36.9% of all businesses, led by those in construction (49.5%) and manufacturing (47.4%). In addition, a shortage of labour force was expected to be an obstacle for 35% of businesses, while retaining skilled employees was expected to be an obstacle for 27.6%.
Of businesses that expected to have labour-related obstacles (shortage of labour force, recruiting skilled employees, or retaining skilled employees) over the next three months, 54.6% expected these obstacles to lead to management working increased hours, while 47.3% expected existing staff to work increased hours as a result. Further expected impacts of labour-related obstacles included a limitation on the businesses’ growth (39.4%), hiring less-suitable candidates (37.4%), and delays in providing orders to customers (28.5%).
In terms of vacant positions, 8.8% of businesses expected to have more job vacancies over the next three months.
Businesses anticipate inflation to be a bigger issue when discussing wage increases with employees
In the context of a tightening labour market, average hourly wages for employees rose 3.3% (+$0.99) on a year-over-year basis in April, similar to the growth observed on a year-over-year basis in March (+3.4%). Meanwhile, in April, the CPI was up 6.8% yearly. Over half of businesses (55.2%) expected inflation to be a bigger issue when discussing wage increases with employees over the next 12 months, with 76.1% of businesses in accommodation and food services and 70.9% of businesses in manufacturing expecting the same.
Businesses expect increases in energy expenses
Nearly half (44%) of businesses expected increases in energy expenses over the next three months. Some of the leading strategies these businesses planned to adopt in light of any increases were raising the prices of goods and services offered (56.8%); changing business practices or processes to reduce energy consumption (18.7%); investing in or switching to energy-efficient technologies (8.8%); and reducing purchases of inputs, either energy- or non-energy-related (8%).