Businesses expect subdued sales in the short term as they face continued cost and labour pressures, despite slowing inflation, according to a survey by the Canadian Chamber of Commerce.

The chamber91ÂãÁÄÊÓƵ™s Business Data Lab released the results of its first-quarter poll on business conditions on Thursday, which found one-third of companies expect to raise prices next quarter.

The retail, accommodation and food services sector, along with wholesale trade, construction and manufacturing sectors, reported feeling the most impacted by ongoing price pressures.

Businesses said they expect inflation to remain the top obstacle over the next three months at 58 per cent, followed by input costs at 46 per cent and interest rates and debt costs at 40 per cent.

Inflation slowed to 5.9 per cent in January, down from 6.3 per cent the month prior. Statistics Canada is expected to release February91ÂãÁÄÊÓƵ™s inflation rate next Tuesday.

Most companies with at least five employees said they are still concerned about labour challenges, which businesses plan to address through higher wages, more flexible work arrangements, and enhanced training, according to the survey.

Around three-quarters of companies with recruiting and retention challenges believed this will hinder their production.

While the business outlook weakened slightly from the previous quarter, 68 per cent of respondents still reported feeling optimistic for their business over the next 12 months, compared with 19 per cent that said they feel pessimistic.

Measured by census metropolitan area, Ottawa business saw the biggest bump in optimism since last quarter91ÂãÁÄÊÓƵ™s survey, and the highest level of optimism overall, rising 12 percentage points to 80 per cent. Toronto businesses were the least optimistic, at 58 per cent, down 12 points.

Business optimism was on the rise across Western Canada, led by Winnipeg at 70 per cent, followed by Saskatoon and Edmonton at 67 per cent, Vancouver at 65 per cent, and Calgary at 63 per cent.

Nearly 16,000 businesses responded to the survey between Jan. 3 and Feb. 6.