Firms in B.C. and Central Canada Report Widespread Capacity Pressures

July 26, 2018
David Williams

The Bank of Canada’s Summer Business Outlook Survey provides some interesting regional insights into the extent of capacity pressures faced by companies across the country.[1] Each quarter, a sample of firms is asked “How would you rate your firm’s current ability to meet an unanticipated increase in demand or sales?” In the summer survey, a record percentage (more than 70%) of firms in British Columbia, Ontario and Quebec responded they would face “some” or “significant” difficulty (Figure 1). Capacity pressures are widespread across firms in B.C. and Central Canada, although they are much less common among firms in the energy-producing regions.

Figure 1: Capacity Pressures in B.C. and Central Canada are Widespread

Q: “How would you rate your firm's current ability to meet an unanticipated increase in demand or sales?”

Percentage of firms reporting they would face some or significant difficulty.

Source: Business Outlook Survey, Summer 2018, Bank of Canada.

In the same survey, firms are also asked to describe the most pressing bottlenecks or obstacles to meeting demand. Labour-related bottlenecks are most prevalent (Figure 2). The most common responses are “our labour force is fully utilized” and “we are unable to find new labour at the current wage.” Pressures on physical capacity are also widespread.

Figure 2: Labour-related Bottlenecks are the Most Commonly Reported Bottlenecks

Q: “What would be the most important obstacle or bottleneck to being able to meet demand?”

Percentage of firms (responses are not mutually exclusive)

Source: Business Outlook Survey, Summer 2018, Bank of Canada.

Wage growth since the 2008-09 recession has been persistently muted across the advanced economies. As discussed in BCBC’s most recent economic outlook, the tight labour market in B.C. is now showing up in accelerating wages, especially over the past six months (Figure 3). According to Statistics Canada’s Labour Force Survey, average hourly wages in B.C. are up 6% over the past year, an increase that is more than double the national benchmark and the fastest pace seen in B.C. in at least three decades. Together with a high job vacancy rate, this suggests that B.C.’s labour market has tightened up significantly.

Figure 3: Wages in British Columbia are (finally) Accelerating

Average hourly wage growth, all industries, y/y %

Source: Statistics Canada; BCBC Economic Review and Outlook, June 2018.

[1] The Business Outlook Survey summarizes interviews conducted by the Bank’s regional offices with the senior management of about 100 firms selected in accordance with the composition of the gross domestic product of Canada’s business sector. The summer survey was conducted from May 3 to June 5, 2018.

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