Business sentiment remains positive

Expert faults energy sector for slight drop

OTTAWA— A new survey by the Bank of Canada suggests overall business sentiment has weakened slightly, but continues to be positive.

The central bank’s business outlook survey indicator decreased slightly, but remains elevated as responses to almost all the survey questions were holding above their historical averages.

“Plans to increase investment and employment, often supported by sales expectations, are widespread, especially in the services sector,” the bank said. The survey results come ahead of the central bank’s next interest rate decision set for Jan. 9 when it will also release its updated outlook for the economy.

Over the next 12 months, the survey suggested that firms expect sales growth to stabilize, while those linked to western Canadian oil prices and to housing in some regions expect demand to weaken or remain subdued and sales growth to moderate.

The price of oil, which has fallen to under $50 (U.S.) per barrel from more than $75 in early October, has countered the boost from resolved trade negotiations, said CIBC chief economist Avery Shenfeld.

He said the survey showed a solid balance of opinion pointing to growth in capital spending and net hiring next year.

“All told, not enough for a rate hike in January, but some ammunition for Poloz to claim that higher rates will later be needed,” he said referring to Bank of Canada governor Stephen Poloz.

The survey showed expectations of future sales were down, likely from the energy sector, but there were other positive signs, said TD Bank senior economist Brian DePratto.

“Elsewhere however, there are a few areas to cheer: order books remain decent, investment intentions solid, and hiring plans are healthy.”