Outlook of rural businesses, fourth quarter 2024
Released: 2025-01-13
In the fourth quarter of 2024, Canadian businesses navigated an evolving economic landscape shaped by factors such as inflation, rising input costs, labour shortages and interest rates. Despite these challenges, most rural and small town (RST) and urban businesses remained somewhat or very optimistic about their 12-month outlook.
Cost-related obstacles pose challenges for rural and small town businesses
In the fourth quarter of 2024, cost-related challenges were a major concern for RST (66.7%) and urban (65.4%) businesses. Inflation (44.3%) and the rising cost of inputs (39.8%) were the top issues reported by RST businesses, followed by the cost of insurance (36.4%), and interest rates and debt costs (30.9%). Urban businesses shared similar concerns, with inflation (45.0%) and the rising cost of inputs (37.1%) topping the list, while also facing challenges related to real estate, leasing or property taxes (28.0%); interest rates and debt costs (28.0%); and the recruitment of skilled employees (28.0%).
The rising cost of inputs, including the rising costs of labour and raw materials, was particularly impactful, with RST businesses (48.9%) reporting greater challenges related to raw material costs, compared with urban businesses (39.5%). Conversely, 65.3% of urban businesses pointed to rising labour costs as a primary concern, while 57.7% of RST businesses reported the same concern.
Chart 1
The top four obstacles for businesses in rural and small town areas over the next three months, compared with businesses in functional urban areas
Rural and small town businesses impacted by interest rates
Nearly half (47.6%) of RST businesses indicated in the fourth quarter of 2024 that interest rates had a medium or high impact on their operations. Among these businesses, the cost of existing debt (39.4%) and new borrowing costs (22.3%) were key aspects of their businesses that were affected by interest rates. Similarly, nearly half (48.2%) of urban businesses reported that interest rates had a medium or high impact on their business, with the cost of existing debt (31.9%) and the sales of products and services (19.6%) being most affected.
Chart 2
Aspects of business most impacted by interest rates for businesses in rural and small town areas, compared with businesses in functional urban areas
Rural and small town businesses face labour-related obstacles
In the fourth quarter of 2024, more than two-fifths of RST (42.0%) and more than one-third of urban (36.3%) businesses expected to face labour-related challenges in the short term. For RST businesses, 29.8% expected recruitment challenges, 24.2% cited labour shortages and 20.3% expressed concerns about employee retention. Urban businesses anticipated similar difficulties, with 28.0% indicating recruitment issues, 18.0% identifying labour shortages and 19.1% citing employee retention as obstacles.
Over two-fifths of RST (42.5%) and urban (42.6%) businesses planned to increase average wages over the next year. Among these RST businesses, the primary drivers were the current rate of inflation (59.1%) and the need to retain talent (44.5%). Urban businesses similarly cited the current rate of inflation (53.4%) as a key factor for wage increases but reported greater pressure to retain talent (50.3%), compared with RST businesses.
Chart 3
The top three reasons for expecting an increase in average wages over the next 12 months for businesses in rural and small town areas, compared with businesses in functional urban areas
Most rural and small town businesses are optimistic about their future
In the fourth quarter of 2024, RST and urban businesses reported optimism for the future, with 75.3% of RST and 70.8% of urban businesses somewhat or very optimistic about their future. RST businesses in professional, scientific and technical services (92.2%) were among the most optimistic, while urban businesses in mining, quarrying, and oil and gas extraction (84.0%) had the highest level of optimism.
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Note to readers
This analysis is detailed in an article released today in the Rural and Small Town Canada Analysis Bulletin, which highlights the economic conditions faced by rural and small town (RST) and urban businesses, along with their future plans and expectations. The findings are based on the Canadian Survey on Business Conditions, fourth quarter of 2024.
This survey was conducted by Statistics Canada from October 1 to November 4, 2024, to develop an understanding of the current practices of businesses and their expectations moving forward. When respondents were asked questions about their expectations over the next three months (referred to in the text as "short term"), that three-month period could range from October 1, 2024, to February 4, 2025, depending on when the business responded. For questions about expectations over the next 12 months, that period could range from October 1, 2024, to November 4, 2025.
Businesses were classified based on their geographic location. Businesses within census metropolitan areas or census agglomerations were classified as part of functional urban areas. All businesses in other locations were categorized as part of RST areas.
Products
The full article "The outlook of rural businesses, fourth quarter of 2024," is now available as part of the Rural and Small Town Canada Analysis Bulletin (21-006-X).
Contact information
For more information, or to enquire about the concepts, methods or data quality of this release, contact us (toll-free 1-800-263-1136; 514-283-8300; infostats@statcan.gc.ca) or Media Relations (statcan.mediahotline-ligneinfomedias.statcan@statcan.gc.ca).
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