“Ontario Businesses Face Darkest Outlook in History as Confidence Plummets”
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A year of high inflation and rising interest rates could see companies retreat
A closed sign on a Toronto store door during the COVID-19 pandemic. Photo by Peter J Thompson/National Post files
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The business owners who power Canada’s biggest economic engine have never been less confident about their province’s economic prospects, further evidence that a year of high inflation and rising interest rates could prompt companies to retreat.
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Just 16 percent of Ontario Chamber of Commerce members said they were confident about their province’s economic prospects, down from 29 percent a year ago, the lobby group said in its annual economic outlook released Feb. 7.
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The Chamber surveyed around 1,900 members from mid-October to the end of November, a time when a recession was being discussed. The Bank of Canada had just released a new forecast that projected economic growth was on the way to a halt, but policymakers said they had no choice but to continue raising interest rates to curb inflation.
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Still, there is something in the report that may support the arguments that the downturn may be shallow. Despite their lack of confidence in the broader economy, 53 percent of chamber members said they were more optimistic about their own ability to generate profits this year, indicating resilience.
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“The gap between external and internal trust is not new and likely reflects the perception that corporations have greater control over their own success than the broader economy, which is more dependent on the direction of government policy and exogenous economic conditions,” the report reads Report.
The biggest concern is labor shortages, with 68 percent of respondents saying their sector is facing the problem, up from 62 percent a year earlier. More than half of the companies surveyed indicated that they had difficulties filling vacancies.
“These talent gaps are caused by a combination of factors including an aging population, immigration backlogs and increased demand for skilled workers to support housing and other infrastructure development projects,” the report says. “In the accommodation and catering sector, many workers have retrained and entered new industries during the pandemic. In healthcare, bottlenecks are both a cause and a consequence of burnout in an overburdened system.”
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Rising costs are also a concern, as the pace of inflation peaked at 8.1 percent in June 2022, the fastest since the early 1980s.
Cost pressures have since eased, but the latest reading of 6.3 percent year-on-year in December is still well outside the Bank of Canada’s target of 2 percent. The central bank has raised interest rates to 4.5 percent from 0.25 percent a year ago in an aggressive attempt to curb what it sees as “excess demand”.
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The chamber’s outlook says interest rates are expected to continue weighing on the province’s economic growth, which the group forecasts will slow to 0.4 percent this year.
According to the chamber’s report, companies want the provincial government to attract more immigrants to address labor law concerns, invest in high-demand training programs to close the skills gap, speed up foreign accreditation and job certificate recognition, and break down inter-provincial barriers to labor mobility and the development of a coordinated health and workforce strategy to promote the well-being of workers.
The Ontario government is expected to present its next budget sometime in the spring.
• Email: [email protected] | Twitter: StephHughes95
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Source: financialpost.com
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