Business Outlook Survey—Spring 2020

Box 1: Consumer-oriented firms reported a collapse in sales due to COVID‑19

To better understand the quickly evolving economic impacts of COVID‑19, the Bank conducted phone consultations with a small, targeted sample of Canadian firms and industry associations between March 13 and 17. The impact of the shock on firms was still escalating, with some firms seeing very recent sharp declines in demand and others only expecting them.

Businesses in the accommodation, food services and recreation industries reported that their sales, orders and reservations had collapsed. Several firms had already closed or expected to soon close their operations due to declining cash flow. Non-food retailers reported a dramatic drop in foot traffic and were scaling down their operations. Businesses in these industries were drastically laying off staff or reducing staff hours in line with operations. However, some were also pivoting to new or less-developed business lines, such as food delivery and online sales, as a way to mitigate the negative effect on revenue.

Some manufacturers anticipated reduced demand from challenged customers. At the time of the consultations, they expected to temporarily shut down their operations and reduce their workforces. While some businesses in other industries (such as those tied to housing construction) had not yet been affected, most respondents indicated significantly more uncertainty about the demand for their products and services.

In contrast, grocery retailers and related transportation services noted that their sales had reached unprecedented levels. They expected some of the surge to last as people continue to eat at home (instead of dining out) and purchase more cleaning products.

Beyond weak demand, several businesses also said that the availability of some inputs, often from China and Italy, had been disrupted. Some firms mentioned that their access to Chinese-sourced inputs was gradually resuming. Retailers, particularly grocery stores, noted that they had not had significant issues with their supply chains.

Finally, when asked about their upcoming capital expenditures, firms generally reported taking a wait-and-see approach. Almost all firms in hard-hit tourism-related and food services were cutting back on renovations and purchases of machinery and equipment or were placing investment plans on hold to preserve cash. Some firms in other sectors had not yet changed their investment plans since they had large investment projects already underway or had not intended to make new investments over the coming year.

News – Bank of Canada