Thank you, Mr. Chair.

Good afternoon, members. It's a pleasure to be here today. My name is Greg Peterson. I'm the assistant chief statistician responsible for Statistics Canada's economic statistics program. I'm joined today by Josée Bégin, the director general responsible for labour market education and socio-economic statistics. Also joining me is Wulong Gu, a senior adviser in our analytical studies and modelling branch.

SMEs are a vital part of the Canadian economy. In 2021 small businesses were employing over 10.3 million people, two-thirds of the overall labour force. Medium-sized businesses were employing another 3.4 million people.

The number of businesses that express labour shortages to be an obstacle has almost doubled in the last 15 months to 37%.

Most indicators are pointing to an increasingly tight labour market in Canada, with the demand for workers accelerating to record levels during the second half of 2021. Job vacancies in the fourth quarter rose 80% compared with pre-pandemic levels, reflecting broad-based increases across provinces and industrial sectors.

Last month, the unemployment rate fell to a near historic low of 5.1% while the participation rate was near a record high among core-aged workers.

To help attract and retain staff, businesses are also adjusting their wage plans. In the three years leading up to April 2022, wages among new hires rose by 15.4%, compared with 12.1% for established employees. In the first quarter of 2022, over two-fifths (45%) of businesses reported that they planned to raise wages for existing employees over the coming year. It is important to note that while wages have been on an upward trend since the fall of 2021, their growth has remained below the inflation rate.

Resiliency of supply chains is an issue.

In the second quarter of 2022, more businesses experienced an increased difficulty in sourcing inputs domestically, compared to the number of businesses experiencing difficulty in acquiring inputs from abroad. Over 40% of businesses expected this difficulty in acquiring inputs, products or supplies from within Canada to persist for 12 months or more, and 39.3% of businesses expected the same difficulty in acquiring inputs, products or supplies from abroad.

In general, we're finding that businesses are responding to these difficulties in supply chains by carrying more inventory.

I'd like to turn for a second to inflation. While much attention is focused on the consumer price index, Statistics Canada follows prices all along the supply chain. In general, these prices are increasing at every stage.

The raw materials price index measures the prices for raw materials purchased by Canadian manufacturers. In March 2022, this index was 64.4% higher than in January 2020, prior to the pandemic. The industrial product price index measures the prices at the factory gate of products sold by manufacturers operating in Canada. Again, in March 2022, the IPPI was nearly 30% higher than in January 2020.

The wholesale services price index measures the margin price that Canadian wholesalers receive for their products. In December 2021, the last data point we have available, the index was 12.1% higher than in January 2020. The retail services price index measures the margin price that Canadian retailers receive for their products. The retail services price index didn't increase too much during the pandemic but had moderate increases throughout 2020. Between 2019 and 2020, the retail service price index increased by 1.9% and further increased by 4.8% between 2020 and 2021.

In all, businesses are facing increased input costs. From Q1 2021 to Q1 2022, there has been a steady increase across almost all industries such that the rising costs of inputs are being identified as an obstacle to business, and over one-third of businesses reported they plan on passing on increased costs of inputs to their consumers. This challenge is accentuated by SMEs, where 75% cite rising costs of inputs as an obstacle, while 30% cite it as a major obstacle.

Statistics Canada has been closely following how SMEs have fared during the pandemic, as they're important drivers of the Canadian economy. In addition to our standard suite of products, we partnered with the Canadian Chamber of Commerce early in the pandemic to launch a forward-facing survey of business conditions. More recently, we've started working with them on a business data lab in order to better support public and private sectors in making decisions in this area.

Mr. Chair, this is a brief summary of the constraints facing Canadian businesses that we're measuring. I'd be happy to answer any questions you may have.

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