OPTIMISTIC OUTLOOK
Overall business sentiment running at near-record levels
Business sentiment in Canada is running at near-record levels for the year ahead,
OTTAWA— A new Bank of Canada poll suggested Monday that companies are optimistic about the year ahead — especially when it comes to sales growth, foreign demand and their investment plans.
The quarterly survey was conducted between mid-August and mid-September — before Canada agreed to an updated North American free trade deal that has alleviated some of the economic uncertainty.
But even with the trade-related unknowns still in the picture, overall business sentiment in Canada was running at near-record levels.
The upbeat results were released a little over a week before the Bank of Canada’s next policy rate decision, which is widely expected to produce another interest rate hike.
The bank carefully studies its forward-looking business outlook survey ahead of rate decisions. The value of the Canadian dollar rose right after the report’s release on Monday and analysts said it bolstered expectations governor Stephen Poloz will increase the central bank’s key interest rate target next week. Poloz has raised the rate four times since mid-2017.
“Building on an improvement in sales over the past 12 months, firms expect sales growth to increase further,” said the central bank’s report, which is based on a poll of senior managers from about 100 firms.
“Reports of better sales indicators for domestic and foreign customers are widespread.”
The survey, however, also found that some firms expected their sales momentum to be limited in the months ahead by labour shortages, competition and regulation. On investment intentions, the survey said that in order to keep up with rising demand — including an expected lift in foreign sales — companies indicated they would pump even more money into their operations over the coming year than they had predicted last summer. “Many firms reported increasing investment spending in response to anticipated strength in demand and capacity pressures,” the bank said. The poll also found firms’ hiring intentions for the next 12 months came in lower than previous surveys.
The dip followed a steady increase in hiring expectations over the last several surveys. Companies, on balance, reported labour shortages intensified over the past 12 months — with the biggest concerns coming from employers in Quebec.
The poll listed jobs in construction, transportation and information technology as the toughest positions to fill.
TD economists wrote the survey shows “Canadian firms remain bullish on the future.”
Combined with stronger than expected growth in the third quarter, Fotios Raptis and Ksenia Bushmeneva said the report “should provide the Bank of Canada with more than enough conviction to move rates higher by another 25 (basis points) next Wednesday.”