Rising Costs Prompt Business Plans to Reduce Impacts of Inflation

This summer Atlantic Canadian businesses are feeling the heat—from inflation—as rising prices cast a dark shadow with no relief in sight from financial concerns or mounting operational pressures. In a poll of the Chamber network’s insight community, Atlantic IMPRESSIONS, more than 80% of participating respondents indicated the impact of inflation is being keenly felt and has negatively impacted their businesses.

The Atlantic Chamber of Commerce gathered input on the effects of inflation with the Atlantic Impressions insight community from June 27 through July 11, 2023, with 133 members weighing in on the subject. Most were clear that inflation has negatively impacted their business, and 48% believe inflation will continue over the next year.

Atlantic Canadian businesses are known for their resilience; however, ongoing escalation of costs could make it difficult for businesses to remain competitive or even solvent. Reduced profit margins and closures could potentially lead to reduced employment opportunities and overall economic slowdown. In fact, the indicators are there, as businesses are already reporting increased material and supply costs (80%), increased labour costs (63%), decreased sales (62%), difficulty planning for the future (62%) and increased debt (39%).

With no indication of when prices will stabilize, businesses will continue to grapple with higher operating expenses, putting an added strain on them to find ways to mitigate the effects on their sustainability. This could force them to make some tough decisions, as businesses in the network community indicated they plan to increase prices (65%), increase productivity and efficiency (45%), reduce staff (32%), and take on more debt (20%) as a means of adapting to the current economic realities. 

Inflation and rising prices will continue to put a strain on businesses if measures are not taken by governments to alleviate pressure on the economy. For instance, Canada’s monetary policy should be re-examined to consider the impact it is having on business and the economy.

The Bank of Canada should aim to stabilize the country’s supply of money if it hopes to have inflation reach its target of 2%. On the heels of another 25 basis points increase, it is time to hit pause on interest rates. Continuing to increase interest rates will add to the cost of doing business and may not have the desired impact of squeezing inflation out of the economy.

If higher interest rates contribute to an economic downturn, but fail to fully get inflation under control, then we might end up repeating history and return to a 1970s stagflation and an extended recessionary period. This will have long-last consequences on the growth and prosperity of our businesses and Atlantic Canada.

Sheri Somerville is the CEO of the Atlantic Chamber of Commerce, a nationally accredited business association representing the network of 90 Chambers of Commerce in Atlantic Canada, and administrator of the Atlantic IMPRESSIONS insight community of more than 1,000+ business leaders and workers from every sector and business type in the region.