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BoC survey finds business sentiment down slightly, but remains positive

January 2, 2019 | By The Canadian Press

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 US$50 per barrel from more than US$75 in early October, has countered the boost from resolved trade negotiations, said CIBC chief economist Avery Shenfeld.

“NAFTA was no longer up the air, but the weakness in oil prices was enough to send the Bank of Canada’s outlook survey to less rosy readings in the fourth quarter,” he said in a note.

He said the survey showed a solid balance of opinion pointing to growth in capital spending and net hiring next year, but not enough to prompt a rate hike in the new 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 in a note.

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

He said higher lending rates may be hitting personal borrowers, but don’t look to have translated into tightened conditions for business.

The indicator of investment spending on machinery and equipment pulled back slightly, but the survey found intentions are still solid.

On balance, plans to hire more workers continue to be widespread and similar to the previous survey.

The survey based on interviews with senior managers of about 100 firms was done from Nov. 5 to Nov. 28.



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