Region's exporters see strong demand: BDC
Plan to increase spending despite ‘umbrella of uncertainty'
Entrepreneurs in Atlantic Canada are cautiously increasing spending plans for the year ahead, according to a new report that found exporters had the most optimistic outlook and highest investment ambitions for 2020.
The Business Development Bank of Canada released the findings of its annual survey of entrepreneurs Wednesday.
It found spending by smalland medium-sized businesses is expected to be positive for the country’s four eastern-most provinces this year.
Still, the bank said there are signs of weakness, with business owners citing a lack of money and poor economic conditions as the main barriers to investment.
The concerns have prompted some entrepreneurs to dial back investment plans, though the report said overall spending in the region will rise slightly.
“Investment intentions remain lacklustre in the Atlantic region, where entrepreneurs’ confidence in the Canadian, U.S. and global economies has plummeted,” the report said.
Yet BDC noted in the report that investment intentions largely hinged on whether the business was focused on the domestic or international market.
For example, the increase in investments planned for 2020 was almost exclusively attributable to exporters, the bank said.
BDC’S chief economist Pierre Cleroux said although entrepreneurs were concerned about the U.S. and world economy, they remained confident about their own businesses.
“The reason they’re confident is they’re facing strong demand,” he said in an interview, noting that 56 per cent of the survey’s respondents said they were not able to respond to all the demand for their products or services.
“Exporters to the U.S. know there’s a lot of uncertainty but if they perform well, they have strong demand,” Cleroux said.
“That’s why they invest — because despite this umbrella of uncertainty over the U.S. economy, demand remains strong.”
While exporters planned to boost spending, spending plans were sluggish for businesses selling to the domestic market.
Meanwhile, the report projected spending in Atlantic Canada would decline in technology, marketing, machinery and equipment this year, while investments would rise slightly in training and recover in buildings and intellectual property.
Across the country, BDC found heightened uncertainty about the world economy among entrepreneurs, with a potential global slowdown undermining confidence and investment plans.
Still, many entrepreneurs planned to slightly increase business spending over the next 12 months.
Investment intentions were highest in Ontario and Quebec where manufacturing, technology and services were the strongest sectors.
Cleroux said there is reason to be optimistic, noting that the new United States, Mexico and Canada free trade agreement should reinstate favourable conditions for Canadian products and services.
In British Columbia, investment intentions were down, with spending on machinery and equipment expected to decrease significantly.
Business owners were most pessimistic in the Prairies, mostly because of low commodity prices and limited cash flow, BDC said.
In Quebec, labour shortages were cited as the top factor limiting investment.
BDC conducted the investment outlook survey among 1,000 owners of small and medium-sized enterprises in Canada during fall 2019.
The bank said the objective of the survey is to gauge their level of confidence in the economy, their business outlook, and their investment plans for the next 12 months.