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News in brief: Survey shows inflation is a challenge to the economy

CPA Canada’s Q2 Business monitor results, luxury tax set to go into effect and other news from the accounting world

A woman looks at a colourful graph displayed on a large screenThe rise in inflation was listed as a challenge to Canada’s economy by respondents to CPA Canada’s Business Monitor survey (Getty Images/Oscar Wong)

NEW SURVEY RESULTS: BUSINESS LEADERS LESS OPTIMISTIC ABOUT CANADA’S ECONOMY

The CPA Canada Business Monitor (Q2 2022) shows that optimism about Canada’s economic outlook has dropped to 16 per cent, down from 40 per cent in Q1.

The CPA Canada survey—which draws insights from business leaders in senior financial roles—also asked respondents about the top challenges to the growth of the Canadian economy. Twenty-nine per cent of respondents listed the rise in inflation, with supply chain issues (14 per cent) and employee recruitment, retention and development (eight per cent) also ranking as challenges to the economy.

When asked about the economic prospects of their own organizations, 46 per cent said they were optimistic (down from 64 per cent last quarter) and 45 per cent of respondents said they expect profits to increase over the next 12 months (a decrease from 63 per cent in Q1).

“Canadian business leaders are now clearly concerned about economic issues whereas, several months ago, the pandemic was top of mind.” said David-Alexandre Brassard, CPA Canada’s chief economist. “Our results show that 70 per cent of these business leaders say inflation is currently hurting their businesses and 44 per cent expect that to continue for a year or more.”

For further details, view the full results of the CPA Canada Business Monitor (Q2 2022).

STUDY RELEASED: CANADIANS SHARE MONEY HABITS AND CONCERNS

CPA Canada recently released its Thriving or Surviving Study*, which sheds light on how Canadians feel about their finances as well as their ability to save.

Key highlights:

  • Only 34 per cent are optimistic they will be better off financially in a year from now.
  • When asked about stressful aspects of managing money, saving was mentioned most as a stressor for 47 per cent of respondents.
  • Just 54 per cent of respondents said they had an emergency fund.
  • Less than half (47 per cent) said they could come up with $2,500 in an emergency without having to borrow or sell something.
  • 64 per cent agree that a significant rise in interest rates would make it challenging to keep up with mortgage and/or debt payments.
  • When asked to grade their overall skills in personal finance, 16 per cent of respondents gave themselves an ‘A’ and 31 per cent gave themselves a ‘B.’

“There appears to be a disconnect between Canadians’ financial behaviours and how confident they feel about their financial skills and knowledge,” said Doretta Thompson, CPA Canada’s financial literacy leader. “Most believe they have the knowledge to make the right decisions when it comes to personal finances, but some key indicators around the state of debt and savings point in a different direction.”

Read the full study for more insights.

*The CPA Canada Thriving or Surviving Study 2022 was conducted by Ipsos via their online omnibus from March 24 to April 2, 2022. Two thousand randomly selected Canadian adults participated in the survey.

IN CASE YOU MISSED IT: NEW LUXURY TAX TO GO INTO EFFECT SOON

The Select Luxury Items Tax that was first announced in Budget 2021 will go into effect as of September 1, 2022. The tax will impact those who are a manufacturer, wholesaler, retailer or importer of certain vehicles and aircraft over $100,000 as well as certain vessels over $250,000. Those subject to the new tax must register with the Canada Revenue Agency.

Looking for other tax updates? Subscribe to the Tax Blog by checking the related box under My Subscriptions in your profile.

MORE WAYS TO KEEP UP

Tap into CPA Canada’s extensive business and accounting resources as well as the Practitioner’s Portal. Plus, get the latest audit and assurance updates from the audit quality blog; and catch up on season two of the Foresight podcast before season three is released next month.