All around the world, economists, academics and business experts are noting signs of a slackening global economy. How will this affect Canadian businesses? Learn what's happening, understand how it could impact your own organization and discover tips to help your business pivot to take advantage of this economic climate.
Signs of a global economic slowdown
Facts and figures from the last quarter of 2018 show the global economy is slowing down. According to an April 2019 Deloitte report, it peaked in 2018; the best-case forecast going into 2020 is that growth will be "moderate."1 In the EU, real GDP growth slowed to just 0.2% in 2018's last quarter. 2 Similarly, NPR reports several signs of a softening American economy, including lowered forecasts from a Federal Reserve Bank survey of business economists.3
A slowing world economy affects Canadian businesses in several ways. When the Bank of Canada reported weakening business confidence, slower sales growth and more conservative sales forecasts from a recent business survey4, the Canadian dollar lost value. At the same time, demand for Canadian exports is slumping, including a late 2018 plunge in Canadian oil prices and China's actions hitting trade in the wake of Canada's arrest of Huawei CFO Meng Wanzhou.
Demand within our borders is also sluggish as spending is expected to slow down in some provinces. The Conference Board of Canada forecasts reduced government and consumer spending in central Canada, Manitoba and Alberta in 2019.5
When the economy slows, Canadian businesses might also find it more difficult to get financing as lenders tighten requirements in anticipation of a recession.
Recognize the opportunity in a sluggish economy
Instead of viewing a slowdown as a negative, consider the opportunities for your business. A Harvard Business Review article reported on a study that found the businesses that grew during economic downturns had several things in common:
- They recognized the signs of a looming recession and acted early to address the coming challenges;
- They took a long-term view to find competitive opportunities during this time, and
- They focused on growth as well as strategic cost reductions during the downturn, looking to improve efficiencies and boost profit margins.6
Proactively position your business to thrive
How can you apply these principles in your own business?
- Invest in improvement projects. You could act now to invest in infrastructure and improvement projects and save money—with a new tax break too. As of late 2018, the Accelerated Investment Incentive allows Canadian businesses to immediately write off the full cost of machinery or equipment used for manufacturing. You could then invest the savings in repairs or updates to your existing equipment or real estate.7 American Express offers working capital solutions to help finance your business initiatives, such as infrastructure and improvement projects. For example, with an American Express Small Business card, you can get up to 55 days* of unsecured credit if you effectively time your purchases payments with your billing cycle.
- Expand your borders. This could also be a time to expand your sales area within the country. According to the Conference Board forecast, Atlantic Canada, B.C. and Saskatchewan will, in fact, see economic growth. Canadian businesses can pivot to move into or expand sales in these provinces to increase or potentially replace revenue from slackening exports.
- Focus on existing customers. Re-balancing your efforts toward acquiring more business from your existing customers, instead of focusing too much on acquiring new ones, can make a significant difference. It can mean using your teams and resources more efficiently and increasing profits, i.e., focusing on depth over breadth. Research finds that new customer acquisition costs five to 10 times as much as selling to existing customers.8
While it can be nerve-racking for you as a business leader to see the news reports of a softening global economy, reframing this challenge as a growth opportunity can go a long way. Don't delay—the sooner you create a strategy, the better positioned your business will be to not only survive but thrive during this time.
* As a charge card, the balance must always be paid in full each month in which no interest charges will apply. The interest free grace period is 28, 29, 30 or 31 days from the closing date of the current statement to the closing date of the next statement depending on the number of days in the calendar month in which the closing date occurs. The number of interest-free days varies based on a variety of factors, including when charges are posted to your account, whether your account is in good standing, and the closing date of your statement.
This article is intended for general informational purposes only and does not constitute legal advice or an opinion on any issue. It should not be regarded as comprehensive or a substitute for professional advice.