Confidence rebounds in 2nd quarter of 2015; more than half of firms ready to invest
Ottawa – The Conference Board of Canada’s index of business confidence rebounded strongly in the second quarter of 2015, suggesting that the worst of the oil shock-driven slowdown may be behind us. After dropping sharply for two consecutive quarters to a six-year low of 86.5, the index fully reversed its decline, jumping up to 105.6. The survey was conducted in the June and July.
The balance of opinion has improved on virtually all survey questions. The pessimism regarding the general economy has mostly subsided. Only 11.3% of surveyed businesses said they expected overall economic conditions to worsen over the next six months, down from a three-and-a-half-year high of 29.5%.
However, the decline in pessimism has not translated into significantly higher optimism. Instead, two-thirds of businesses said they expected conditions to remain the same, up from 52.3%, whereas the share of firms that expected conditions to improve increased by just 4.4 percentage points to 22.6%.
Canadian firms displayed more confidence about their own financial positions. About half said they expected their financial positions to improve over the next six months — up from just 29.5% in the previous survey. Equally tellingly, only 4.8% of businesses expected their finances to worsen, which is significantly down from the six-year high of 21.6% recorded in the previous survey.
The return of confidence is translating into stronger investment intentions. Of the surveyed firms, 56.5% said it is a good time to undertake major investments in structures, machinery and equipment, up from 47.7% in the previous survey. Moreover, the share of firms who said the present was a bad time to invest declined to 12.9%, down from 27.3% in the previous survey.