Ottawa consumers may be spending less, but local businesses are feeling more optimistic about 2024 than many of their counterparts across Canada.
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Ottawa consumers may be spending less, but local businesses are feeling more optimistic about 2024 than many of their counterparts across Canada, according to a new survey from the Canadian Chamber of Commerce.
According to the chamber’s Canadian Survey on Business Conditions, which polls more than 16,000 businesses and releases the results quarterly, business optimism for next year is declining nationally. In the fourth quarter of 2023, 66 per cent of businesses surveyed expressed positivity, compared to 70 per cent at the same time last year.
“Businesses are less optimistic than they were in the previous quarter,” said Andrew DiCapua, senior economist with the chamber. “But that’s still two-thirds of businesses that are optimistic, so there is a silver lining in that.”
Compared to the national results, Ottawa businesses are feeling pretty good. According to the survey, 74 per cent of those surveyed locally expressed positive feelings about the year ahead.
“It’s interesting given the higher rate environment, with higher inflation and slower demand expectations from Ottawa businesses,” said DiCapua.
DiCapua suspects the high number of service-oriented businesses in Ottawa compared to other cities may be a factor.
“The Ottawa business market is very service-oriented and if you look at the Q3 GDP results for Canada, the goods sector is declining at a faster rate than services,” he said. “Industries where interest rates matter a lot, we’re starting to see a pullback. These industries are definitely feeling the brunt of the high interest rate environment.”
By contrast, service industries, including hospitality and accommodations, are expecting a boost in the holiday season, which DiCapua said could be contributing to local optimism.
But those feelings could change rapidly in the new year, he added.
According to DiCapua, optimism is down overall in Ontario and Ottawa may soon follow suit. In recent analyses, he said lack of optimism can be significantly correlated to markets with higher housing costs, lack of affordability, and decreased spending, all of which are significant challenges for Ottawa.
In its Local Spending Tracker report for November, the chamber found that real spending growth per person in Ottawa was down 10.2 per cent, ranking it last on a list of major cities across Canada. The next closest ranked city, Winnipeg, was down 6.9 per cent, while the national average was down 3.8 per cent.
“Simple correlation analysis suggests consumers in places facing larger housing affordability challenges have cut their spending more,” the chamber’s chief economist Stephen Tapp told OBJ at the time. “We’ve seen consumer spending numbers falling back really consistently after the bank tightens policy. People are essentially just buying less stuff.”
According to Tapp, no matter how you cut the data, Ottawa’s spending growth was well into the negative, ranked below the national average and at the bottom of the list of the 21 cities monitored by the chamber.
It’s a trend DiCapua has his eyes on for the next quarter.
“It’s a little concerning to see consumer confidence levels at the lowest they’ve been since the financial crisis,” he said. “We expect businesses in the short term to be dealing with weaker sales in the holiday season. We’re going to be watching the Bank of Canada as they contemplate the timing of their rate cuts. But at the end of the day, businesses will need to contend with this higher rate environment and prepare accordingly.”
