Business sentiment turns positive
Bank CEOS say they’re also feeling upbeat
OTTAWA/ TORONTO • Business sentiment in Canada has turned slightly positive for the first time since the COVID-19 pandemic began, with the outlook bolstered by stronger foreign and domestic demand, according to a Bank of Canada survey.
The survey, conducted ahead of many tougher restrictions aimed at curbing surging COVID-19 infections, found that while half of businesses say their current sales are below pre-pandemic levels, most expect them to rise in the next 12 months.
“The Business Outlook Survey indicator continued to recover and turned slightly positive, signalling improved business sentiment,” the Bank of Canada said in a report on Monday.
“Robust foreign demand, improved confidence related to vaccines, and ongoing government relief programs all contribute to the improved outlook.”
Canadian bankers also were upbeat. Bank CEOS forecast a rosier growth outlook for 2021 and 2022 on Monday, counting on the rollout of coronavirus vaccines to help drive an economic recovery and release billions of dollars worth of pent-up consumer demand.
The approval of vaccines to prevent the spread of COVID-19 prompted the banks’ chief executives to strike a more optimistic tone at the RBC Capital Markets Canadian bank CEO conference.
“We may see a drastically better economic environment in the back half of 2021,” Bank of Montreal Chief Executive Darryl White said. “When we get through the next two to four months, and see the vaccine overtake the virus, then we’ll be in a period where loan growth, toward the back end of the year, can begin to be very substantial.”
The Bank of Canada survey of around 100 firms was conducted between Nov. 16 and Dec. 4, prior to a number of Canadian provinces imposing stricter restrictions to contain the rapid spread of COVID-19 and before the vaccine rollout began.
While business sentiment strengthened overall, it remained solidly negative for many firms.
Indeed, one- third of businesses — mainly those providing high- contact services — do not expect sales to return to pre- pandemic levels in the next 12 months.
Still, the investment and employment outlook improved from earlier surveys, with about half of firms now expecting to increase their workforce in 2021.
Inflation expectations, meanwhile, eased slightly, with the majority of firms expecting inflation to remain below two per cent for the next two years.
The survey also found improved confidence on vaccine development.
BMO CEO White said the bank expects economic growth of as much as five per cent in Canada this year while the central bank expects gross domestic product (GDP) to rise 4.2 per cent.
Canada’s biggest banks ended fiscal 2020 with better- than- expected earnings, but warned of an uneven economic recovery and a slower housing market.
“We’re probably better off today in saying there’s going to be a steady improvement than we were 90 days ago” when a vaccine was still uncertain, said Bharat Masrani, chief executive of Canada’s second- largest lender Toronto- Dominion Bank.