Business economic outlook worsened in the third quarter as interest rates began to have a cooling effect on the Canadian economy.

In its quarterly report on financials statistics for enterprises released Wednesday, Statistics Canada said the ongoing labour shortage, downward trend in energy and metal prices, and depreciation of the Canadian dollar against the U.S. dollar all contributed to increased uncertainty and worries over an economic slowdown. 

It said Canadian corporations saw seasonally adjusted net income before taxes decrease by 8.1 per cent in the third quarter compared to the previous quarter, though it increased year over year.  

Net income before taxes for oil and gas extraction was down 3.4 per cent as gas prices were lower during the quarter. 

Meanwhile, the net income before taxes in petroleum and coal product manufacturing was down by 61.7 per cent, while it declined 73.8 per cent for mining and quarrying and support activities.

The construction industry was less profitable in the third quarter, seeing its net income before taxes decline 11.1 per cent due to higher costs, especially wages and materials, according to the agency. 

Financial corporations also saw net income before taxes go down by 11.6 per cent. 

The sector saw provision for credit losses rise by 151 per cent in the third quarter due to unfavourable changes in the economic outlook, Statistics Canada said. 

However, net income from interest was up 4.8 per cent as the Bank of Canada hiked interest rates, and credit card loans to individuals were also up three per cent. 

Amid rising food costs, the companies manufacturing food, soft drinks and ice saw their average net profit margin go from a pre-2020 average of 5.3 per cent to an average of 5.4 per cent so far in 2022.

However, the companies selling food and beverages saw average pre-tax profit margin go from an average of 2.2 per cent in before 2020 to 3.5 per cent so far in 2022. 

Statistics Canada attributed the net income increase at food stores to higher sales volumes and wider margins, though it noted the industry has low margins compared to other non-financial sectors.