Business Outlook Survey—Spring 2021

Demand has improved outside of high-contact services

Nearly two‑thirds of firms indicated their sales have reached or exceeded pre-pandemic levels—an increase from the winter survey and a sign that the recovery is broadening further (Chart 2). Half of businesses reported that the second wave of containment measures and lockdowns had a smaller or no adverse impact on their sales compared with the first wave. Firms noted that this is largely because they themselves—and their customers—have adapted to the evolving crisis. For example, businesses now have greater capacity for more online sales, staff are set up and familiar with remote work, and cleaning and physical distancing protocols are in place.

With uncertainty having receded and vaccination rollouts continuing, firms’ indicators of future sales have strengthened again (Chart 3). For many businesses, demand from domestic and foreign customers—particularly from the United States—has improved from a year ago. Firms’ sales outlooks are also supported by low interest rates and a shift in consumer preferences to products and services that make it easier for Canadians to stay at home and reduce contact with others. For example, firms tied to housing and household goods (such as those that provide construction, financial and real estate services, as well as building materials, appliances and food) commonly reported that their sales indicators are up from already solid levels. Business service providers are also seeing stronger demand, sometimes as firms change their ways of doing business during the pandemic (e.g., adopting new digital platforms and applications). Exporters linked to commodities also noted that demand has improved, albeit from subdued levels.

Still, the negative effects of the pandemic continue to weigh heavily on sales prospects for an important group of businesses. One‑fifth of firms do not expect their sales to return to pre‑pandemic levels in the next 12 months. Most of these firms are tied to high‑contact services, such as businesses in tourism and in pockets of non‑essential retail. Some of these firms indicated their sales outlooks have slightly improved, but from a period of extremely weak demand. A few businesses remain uncertain about their sales outlooks because the evolution of the pandemic is still unclear.

News – Bank of Canada