Business Outlook Survey—Summer 2020

Box 1: Firms expect production could return quickly but anticipate sales will recover gradually

As part of the Bank of Canada’s efforts to better understand the economy’s recovery from the COVID‑19 pandemic, we asked firms participating in the summer 2020 Business Outlook Survey how quickly they expect their sales, employment and production to return to pre-COVID‑19 levels. Firms reported that, while capacity could resume quickly as the economy reopens and containment measures are lifted, the recovery in demand is expected to be more gradual. Across the response categories, businesses commonly referred to elevated uncertainty regarding future demand.

Firms’ expectations of a return in sales to pre-pandemic levels often depend on the lifting of government-mandated restrictions. About 40 percent of businesses reported that they anticipate their sales will fully recover by next year or that their sales were not negatively affected by the pandemic (Chart 1-A). This set of firms also expect the size of their workforce to be near pre-pandemic levels in one year. These firms generally did not report recent staff layoffs or declines in their past sales. They either sell non-cyclical goods or services or work within long-term contracts and include manufacturers, business-to-business services firms (e.g., providers of consulting or technology services) and utilities. About 15 percent of businesses expect their sales to mostly recover in the next 12 months. They are primarily in manufacturing. Among these firms, roughly half reported a decline in past sales and most had laid off workers.

Chart 1-A: More than half of firms expect their sales and employment levels to be near pre-pandemic levels within a year

Chart 1-A: More than half of firms expect their sales and employment levels to be near pre-pandemic levels within a year

To what extent do you think your sales/workforce will be back to pre-COVID-19 levels in the next 12 months? Percentage of firms in expanded sample (119 firms)

Sales Employment
Fully return, unaffected or benefited 47 70
Mostly return 19 11
Partially return or too uncertain 43 18
No return 9 15
Not answered 1 5

Slightly less than half of businesses expect at most a partial recovery in their sales over the next 12 months or report that the trajectory of their sales is too uncertain to predict. These expectations are concentrated among firms in the services sector, especially those in tourism-dependent, finance or real estate industries, as well as businesses linked to commodities, particularly energy. Most of these firms reported declines, often significant, in their past sales and had recently laid off workers. Many of these businesses have frozen hiring or do not anticipate a return to previous employment levels. Some noted they have streamlined operations, often with the use of technology, in response to the crisis. Around a third of this group of firms said the Canada Emergency Wage Subsidy program has helped them reduce or avoid layoffs.

When asked about production, most businesses reported they would be able to return to normal levels within a month once restrictions are lifted (Chart 1-B), suggesting the capacity of these firms to produce has not been reduced. Generally, businesses in the services sector would be able to resume full operations somewhat faster than those in the goods sector. Services sector firms that expect a slower return to normal production often noted that labour-related constraints would be the reason for the delay. Some goods firms reported that it would take longer to scale back up because of complex production processes or logistical issues. A few businesses noted supply chain issues related to the pandemic.

Chart 1-B: Most businesses can resume normal production within a month

Chart 1-B: Most businesses can resume normal production within a month

Once restrictions are lifted, how long would it take for production to return to normal? Percentage of firms in expanded sample (119 firms)

Less than 1 week or unaffected 71
1 week to 1 month 22
1 to 6 months or too uncertain 14
More than 6 months 4
Not answered 8

News – Bank of Canada