Weathervaning Local Business Conditions

Description

Statistics Canada released their weekly Local Business Conditions Index (RTLBCI) covering the week ending April 11, 2022 and it shows that business conditions in Calgary and Edmonton are on the rise.

From January 3, 2022 to April 11, 2022, Calgary’s RTLBCI has increased from 164.97 to 239.36, while Edmonton’s has also increased from 214.65 to 260.48. An increase in the RTLBCI value implies the local business conditions are improving while a decline implies a deterioration. 

Calgary ranks second, behind Montreal, as the metropolitan area with the largest improvement in business conditions since January. Edmonton placed in the 45th percentile.

The Real Time Local Business Conditions Index (RTLBCI) tracks 15 metropolitan areas across Canada. These select cities cover more than 61% of the population and businesses in Canada.

The goal of the RTLBCI is to compute a near real-time index of economic activity across major Canadian cities. The index is calculated with a baseline value of 100 that began at the start of the index, August 2020. The RTLBCI is normalized which allows cross comparison between cities as well as over time. 

The RTLBCI has three components. 

The first component estimates the economic size of a business area at the local level. The economic size is static value and is calculated from the total revenue of all the businesses within the designated city. The total revenue data comes from the Business Register. The Business Register covers the total business revenue and employment numbers across the nation.

The second component captures the operating conditions of the businesses within the city. The operating conditions are dynamic values and are measured as a percentage of businesses that have closed (temporarily or permanently) within the specific geographical area between periods. Data for this component is derived from API’s such as  Google Places, Yelp Fusion and Zomato.  They monitor and track places that are defined as establishments, geographic locations, or prominent points of interest.

The third component captures the level of business activity within the city. The level of business activity is a dynamic value and is measured by tracking the change in traffic flows between the current week observations and pre-pandemic levels. TomTom Traffic Stats is used to monitor and track changes in traffic flows. TomTom Traffic Stats is a self-service product that provides direct access to the largest historical traffic database.

It is important to note that the absolute value of the calculated index varies considerably between cities due to the large variation in economic sizes.

The RTLBCI was a part of an initiative by Statistics Canada to improve the timeliness of statistical data during COVID and Canada’s recovery. It is classified as an experimental metric and is released with caveats that there are some limitations, and that the data used and computational methods may be subject to change.

A number of improvements could be made to the calculation of the RTLBCI, such as adding more cities, changing the API data on operating conditions to a formal survey, and broadening the traffic monitoring to include foot traffic and online purchasing. While Statistics Canada has acknowledged the limitations and are working on improving the calculation of the RTLBCI, it appears to provide a fair directional indicator of local business conditions. In short, it is worth keeping an eye on to track which way the business condition winds are blowing.

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