Canadian businesses expect rising inflation and cost of inputs to be major obstacles over the next three months, according to Statistics Canada’s Survey on Business Conditions. However, pressures faced by businesses continued to ease in the first quarter, following the trend seen in the fourth quarter of 2023.

More than half of businesses, 55.4%, expect rising inflation to be an obstacle, making it the leading challenge businesses expect to face. The second most-expected obstacle is the rising cost of inputs, cited by 43.7%. This includes labor, capital, energy and raw materials. When asked to indicate which expected obstacle would be the most challenging, 13.7% of businesses identified rising inflation, 10.6% identified the rising cost of inputs and 10.0% said recruiting skilled employees. 

However, fewer businesses expect labor-related challenges over the next three months; 39.4% expect to face at least one labor-related obstacle over the next three months, compared with 40.3% in the fourth quarter of 2023. In addition, the most expected labor-related obstacle is recruiting skilled employees, cited by 29.5% of businesses.

Meanwhile, 68.4% of businesses reported being either very optimistic or somewhat optimistic about their outlook over the next 12 months, up slightly from 65.9% that expected the same in the fourth quarter of 2023.

 Other findings include:

• 22.7% of businesses expect a labor force shortage to be an obstacle over the next three months, down from 25.7% in the fourth quarter of 2023.
•  22.1% of businesses expect to face challenges retaining skilled employees.
• 13.9% of businesses currently use AI or plan to use it. Among those using generative AI, 46.1% use it to increase automation in tasks without reducing employment.

Statistics Canada conducted the survey from Jan. 2 to Feb. 5.