July 5, 2012, Toronto — With reduced consumer spending ranked as one of their biggest challenges this year, the majority of Canadian businesses have no plans to raise prices, according to a new BMO Bank of Montreal report.
Over half of the businesses surveyed (58 per cent) reported that they
are focusing on improving productivity through investments.
The BMO report, conducted by Leger Marketing, was released after the
Conference Board of Canada revealed its consumer confidence index fell
by nearly seven points in June, falling to 74, back where it was in
January.
The Canadian businesses surveyed cited the following challenges as they look to the remainder of 2012 and into 2013:
- Consumer spending (22 per cent)
- Energy costs (16 per cent)
- Labour costs (16 per cent)
- Raw material costs (11 per cent)
- Global economy (nine per cent)
- U.S. economy (seven per cent)
The report found that 51 per cent of businesses in the arts/culture,
travel and tourism sectors were most likely to cite reduced consumer
spending as their biggest challenge. By contrast, only 14 per cent of
businesses in the manufacturing, construction and mining/oil and gas
sectors said it is a top concern. In those sectors, labour costs were
the top issue at 26 per cent.
“Modest economic and wage growth, the lure of cross-border deals and
global economic uncertainty have convinced many Canadian businesses not
to raise prices,” said Sal Guatieri, senior economist with BMO Capital
Markets. “For many businesses, remaining competitive and focusing on
productivity are primary concerns, both of which will help Canadian
businesses in the long run.”
Plans to invest in business
Looking ahead, nearly six in 10 Canadian business owners plan to invest
in their business this year and into 2013. Of those businesses that plan
to make investments, 88 per cent plan to invest the same or more than
they did last year.
“Canadian businesses have shown a remarkable resiliency over the past
couple years and are attuned to their unique markets and their
customers. While raising prices is not part of the plans for many
businesses, there is a focus on improving productivity through targeted
investments in upgrading infrastructure and retooling business
processes,” said Cathy Pin, vice-president of BMO Commercial Banking.
The survey also found that in the past year, Canadian businesses have
taken a number of steps to improve their business performance. According
to the BMO study, 36 per cent say that lower interest rates have had
the most positive impact on their business, 47 per cent point to
productivity improvements such as upgrading equipment and processes and
49 per cent say lowering expenses and/or costs have had the most
positive effect on their business performance.
The online survey was conducted by Leger Marketing between March 21 and
April 12, using a sample of 500 Canadian small business owners. A
probability sample of the same size would yield a margin of error of
4.38 per cent, 19 times in 20.
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