Canadian business sentiment broadly positive

The Prairies remain the exception where economic indicators remain weak as energy sector continues to be challenged these days

Results from the winter Business Outlook Survey suggest that business sentiment is broadly positive except in the Prairies, where indicators remain weak, says the Bank of Canada in a report released on Monday.

“In aggregate, firms’ outlook is supported by expectations of healthy domestic and foreign sales,” said the Bank.

Key findings of the survey include:

  • Expectations for future sales growth remain positive. Signals for domestic sales have strengthened but are still muted by weakness among firms tied to the energy sector. With concerns around trade tensions declining somewhat, expectations for foreign sales are slightly less guarded compared with previous surveys;
  • Intentions to increase investment spending are somewhat less widespread but remain positive. Many firms reported recently completing large investments and often referenced investments in technology or other efforts to improve efficiency. After trending downward in recent quarters, firms’ hiring intentions improved;
  • Indicators of capacity pressures suggest that economic slack has been absorbed and that labour markets have tightened except in the Prairies;
  • Survey results continue to point to modest price pressures. Inflation expectations are unchanged, with the majority of firms still expecting inflation to be in the lower half of the Bank of Canada’s inflation-control range;
  • Credit conditions have changed little over the past three months; and
  • The Business Outlook Survey indicator continued to edge up after falling below zero in early 2019. This suggests a small improvement in business confidence.

The Bank also released on Monday its Canadian Survey of Consumer Expectations. Key findings include:

  • Consumers’ expectations for one-year-ahead and five-year-ahead inflation declined slightly in the fourth quarter of 2019, while two-year-ahead expectations were roughly unchanged since early 2018;
  • Views on the labour market were relatively similar to those in the third quarter, with consumers’ expectations for their wage growth remaining largely stable. Other indicators continue to send mixed signals about the state of the labour market;
  • Overall, consumers’ expectations for growth of household income were largely stable in the fourth quarter of 2019. At the same time, their expectations for spending growth increased; and 
  • Consumers’ expectations for house price growth went up somewhat in Canada overall. Expectations for house price growth increased in British Columbia, though they remained below the highs reached in 2018. Expected growth in house prices remained weak in Alberta and Saskatchewan.

Mario Toneguzzi is a business reporter in Calgary.

© Calgary’s Business


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