Bank of Canada poll found business sentiment almost back to summertime high
OTTAWA—Canadian companies are more upbeat about the future than they were three months ago with firms planning to boost investment and to hire more workers, according to the Bank of Canada’s latest business outlook survey.
The poll, released January 8, found that overall business sentiment in the country had almost bounced all the way back to its summertime high.
The results were released a little more than a week before the Bank of Canada’s next interest rate announcement—and will likely fuel predictions governor Stephen Poloz will raise the trend-setting interest rate for a third time since last summer.
“Firms plan to expand operations to accommodate sustained demand, which is evident in a rebound of investment and employment intentions since the autumn survey,” said the poll of about 100 firms.
The latest poll said hiring intentions had increased since the fall, particularly in the service sectors, as labour shortages became more common.
“Shortages are more intense than they were a year ago,” the report said.
The indicator reflecting firms’ plans to increase investment spending perked back up, close to a post-recession high, and became more broadly based across sectors and regions.
The survey also found that companies remained upbeat about their sales growth expectations for the next 12 months. Their outlooks, however, had moderated somewhat with predictions that the strong run of recent sales activity would return to a more normal level.
The report said that to explain the sales growth expectations businesses were “pointing to strong real estate markets, sustained foreign demand and tangible support from federal stimulus spending.”
Companies, however, expressed growing concerns about the renegotiation of the North American Free Trade Agreement and expanding protectionism, in general. Still, most predicted promising US growth and the low Canadian dollar to help their sales over the coming 12 months.
The survey also showed that the share of businesses predicting they will face some or significant difficulty meeting any unexpected rush of demand had also climbed to its highest level since the 2008-09 recession.
Financial markets will scrutinize the poll results ahead of the interest rate announcement next week.
On January 5, an impressive jobs report led many analysts to change their predictions to say that Poloz will raise the central bank’s key interest rate target at the January 17 announcement.
The employment numbers showed that job creation in 2017 reached a pace not seen in a calendar year since 2002. The surge helped push the unemployment rate last month to 5.7 percent—its lowest mark in more than 40 years.