Insights & Analysis

July 26, 2021

Continued Optimism about Alberta’s Short-Term Economic Outlook: Results from the June Business Expectations Survey

Highlights
The Business Council of Alberta’s most recent Business Expectations Survey shows continued optimism about the province’s short-term economic outlook. Conducted during Alberta’s staged reopening in June, the survey confirms that businesses see economic conditions improving and anticipate strong growth in sales, hiring and investment activity, albeit from a relatively weak base:
  • 83% of respondents reported an uptick in forward-looking indicators—things like new orders, advance bookings, and sales inquiries.
  • 62% of respondents expect to increase employment over the next year, up from 55% in the March survey.
  • Only 7% plan to cut investment in machinery and equipment.

The one caveat to this optimistic outlook is that more than half of businesses (52%) are reporting increased difficulty in finding the workers they need. If labour shortages become a major problem even in spite of high unemployment, they could weigh on what is otherwise a very positive outlook for the Alberta economy through the remainder of 2021 and into next year.

In June, the Business Council of Alberta conducted its fourth Alberta Business Expectations Survey (BES)—a quarterly tool to assess recent trends in business conditions and economic expectations in the province. This survey captures the perspectives of BCA’s strongest asset—our member CEOs—whose expectations play an important role in setting the direction of the provincial economy.

In our last survey conducted in March, respondents showed a notable improvement in their outlook for future sales, hiring, and investment as vaccination efforts began to ramp up in Canada.

The pandemic situation has fluctuated greatly since then, as the second quarter was a period of pandemic-related extremes: May saw Alberta record its highest case counts and ICU occupancy, accompanied by stringent public health measures, while June saw an equally strong drop in cases as vaccinations reached critical mass. June also marked the beginning of the province’s three-stage reopening plan, culminating with the full lifting of provincial restrictions on July 1. 

With restrictions lifted, this survey shows that business expectations for the rest of 2021 and into next year are strongly positive: sales are recovering; indicators of future business activity are picking up; and businesses are looking to add workers in the months ahead. Similarly, more businesses plan to increase investment than those who plan to cut back, and access to credit appears to be improving. Meanwhile, the labour market is clearly tightening as businesses report more difficulty in hiring.

It is worth noting that compared to our March survey, optimism on some forward-looking factors, appears to have moderated. However, this likely reflects survey timing rather than lowered expectations. Most survey questions ask respondents to compare future business activity with the previous 12 months. This means that, for the March survey, the period of comparison included the worst part of the pandemic for many businesses, whereas our June survey compared future expectations against a stronger base.

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Survey Results
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 remain upbeat

Most businesses see a continued improvement in their forward-looking indicators—things like new orders, advance bookings, and sales inquiries that signal anticipated future economic activity—as well as a high level of optimism for future sales. However, with the worst behind them, slightly fewer respondents expect sales to accelerate over the next 12 months while more expect activity levels to hold steady. What is unclear from the survey alone is if those businesses anticipating flat sales (24% of respondents) are currently at, above, or below their pre-pandemic levels.

Key Findings

  • For the second survey in a row, 83% of respondents reported an uptick in forward-looking indicators.
  • 72% of respondents expect sales volumes over the next year to accelerate compared to the last year—down 11% from the last survey—while 9% expect sales to remain flat.
  • Overall, there is a strong positive balance of expectations of 69% for future sales activity. That figure is 12 percentage points lower than our March survey because a growing share of businesses expect sales to stabilize (24%) rather than to decrease (3%).

Employment outlook is improving while the labour market is tightening

The improved economic outlook continues to mean that businesses are planning to add new workers. While employment rates in the province have not yet returned to pre-pandemic levels, the continued (and growing) expectation to increase hiring activity within the next year bodes well for Alberta’s economic recovery.

That said, the labour market is tightening. Since March, a growing number of businesses have reported difficulty filling the job openings needed to meet increased consumer demand. Doubtless there are many contributing factors, but given that unemployment remains high, there are concerns about a potential mismatch between the skills people have and those sought by employers. For people who do have the skills businesses need, they may end up seeing a bidding war for their talents.

Key Findings

  • 62% of respondents expect to increase employment over the next year, up from 55% in the March survey. Another 28% are expecting employment to remain flat, and with just 10% expecting to reduce their staff complement.
  • 55% of respondents reported more intense labour shortages compared to a year ago, a significant 22% increase from the March survey.
  • Just over half (52%) of respondents reported difficulty filling the positions needed to meet demand, a 16% increase over the March survey.

Investment expectations remain positive, and credit availability improving

In our March survey, we saw a dramatic increase in business investment expectations as companies got their first glimpse of a post-pandemic world. Investment intentions moderated in our June survey, but remain positive as only 7% of respondents reported they were planning to dial back their investment plans. That said, the number of companies planning to increase investment did fall back, while more respondents expect to simply maintain capital spending at current levels.  

Meanwhile, credit access continues to improve. Fewer businesses are reporting tighten credit conditions, while more are reporting improved access to capital. In our March survey, approximately 1 in 5 respondents reported increasing difficulty accessing credit; now, this number is just 1 in 10. This could indicate either that businesses themselves are in a stronger financial position and can more easily access loans; or that banks are more confident that the worst of the pandemic is behind us. Either way, this is an encouraging sign.

Key Findings

  • 38% of respondents expect to spend more on machinery and equipment over the next year, while just 7% expect to spend less.  
  • The balance of expectations from March to June for spending on machinery and equipment decreased by 12%, a reduction caused predominantly by a shift from businesses expecting to spend more (-9%) to businesses expecting to spend about the same (+6%).
  • On balance, respondents noted that access to financing has steadily improved over the last three surveys, shifting from -20% (December 2020), to -2% (March 2021), and again to +10% (June 2021).
  • Similarly, fewer respondents are reporting that access to credit markets has tightened over the last three months (-9%) since the March survey, with more reporting access has remained steady (+5%) or improved (+4%). The vast majority (69%) believe access to financing has remained steady.

Summary of Results

We are also seeing early signs that survey respondents may be beginning to understand and settle into what a “new normal” may look like. Businesses are reporting more difficulty in filling job openings, and while future business sales and investment expectations remain positive, we may be beginning to see the early signs that this growth in optimism is moderating slightly.

These moderating indicators shouldn’t be interpreted as a storm cloud on the horizon—far from it. More likely, this moderation may be indicative that respondents are getting better at understanding present risk and interpreting what a stabilizing, post-pandemic business environment may look like. That their overall outlook remains overwhelmingly bodes well for the continued economic recovery.

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