OTTAWA — Business optimism in Canada is rising sharply as the gloom of the winter months appears to be giving way to better expectations for sales, hiring and investment, a new Bank of Canada survey suggests.
The quarterly survey of senior management from 100 representative firms, conducted over four weeks in February and March, found the outlook for future sales among the most positive since the recession.
It showed 58 of the respondents expected higher sales in the next 12 months, as opposed to 23 that expected fewer.
The Bank of Canada's important measure of business confidence was positive 35, a big turnaround from the negative four in its January report.
In the intervening period, there appeared to be some resolution of the European debt situation and the United States economy showed signs of improved growth.
"The results of the spring survey point to more optimism among firms," said the central bank's report Monday.
"With modestly improved expectations for near-term U.S. economic growth and fewer concerns about the global economic and financial situation, some of the dampening effects on sales expectations have subsided, and more firms report that recent indicators of future sales activity, such as order books and new contracts, have improved compared to a year ago."
Canadian firms are also reporting positive spillover effects from strong commodity prices for natural resources that Canada sells the world, the Bank of Canada said.
The results are in line with what has been a mostly improving climate for business. Europe's debt crisis was recently downgraded by the Bank of Canada to a "chronic" problem, and U.S. growth has been stronger than anticipated.
On Thursday, Statistics Canada reported 82,000 jobs were added in March, reversing what had been a few months of modest employment reversals.
The central bank's latest survey, which was conducted between Feb. 21 and March 15, showed a positive balance of opinion of 43 per cent of firms saying they will add employees over the next year, about the same as in January.
As well, more firms said they will increase their level of investment in machinery and equipment -- a good signal for productivity and economic growth -- over the next 12 months.
The central bank calls the plus 24 balance of opinion reading on this question "solidly positive."
Meanwhile, firms are not reporting significantly greater capacity pressures or labour shortages, and believe both input costs and inflation will be moderate.
As well, the executives say credit conditions have eased over the past three months, which should make it easier and less expensive to fund operations and expansion.
A separate survey of senior loan officers also found that both the price and conditions for lending to firms have improved.
The business survey is one of many indicators that are likely to be considered in the Bank of Canada's new outlook for the economy, which will be published next week.
In a recent interview, governor Mark Carney described economic conditions as "a bit firmer than we had anticipated in January," and has said that the slack in the economy has tightened.
Although prospects for growth are improving, economic opinion is unanimous that there is virtually no chance Carney will lift his foot off the pedal on stimulative interest rates.
The bank's trendsetting policy rate has been fixed at one per cent since September 2010, even though Carney continued to express concern such easy lending conditions are luring many Canadians into high levels of borrowing.
Analysts note that the alternative would likely be worse -- raising rates would slow down domestic economic activity and boost the Canadian dollar, making Canadian exports less attractive.
Comments are now closed for this storyPrairie Boy in SKsaidThanks to Mr. Harper, we're not in the same sad state as the U.S. is...
Maury Finkelstein
saidBank of Canada reports that business optimism is growing huh? Kinda like the Titanic passengers reassuring themselves that help would come after all the lifeboats left the ship. Tell me lies..tell me sweet little lies..dee.dee..dah!
Cam in Grande Prairie
saidBussiness optimism may indeed be up however fuel price increases will calm the optimism soon enough. Meals will be prepared 100% at home here(no restaurants), Goodwill gets even more of my bussiness(Walmart, Sears and even Canadian Tire will get less of my purchasing dollar), Glasses, major unnecesary dental will be put off a year or two(even though I have decent coverage...not 100%)...and it goes on and on... Gas fuels the economy period...High gas prices will make the economy sputter soon enough...and we will be rolling backwards soon just like in 2008/2009. Fact is the fuel I use is the amount I need to use...I have cancelled the long trips and keep the short trips down as much as I can...Looks like my money for the higher fuel prices...will not be there to help the rest of the economy!
redsol
saidOh yes, lets go survey 100 "Senior Management"...are you stupid? All 100 of these people probably make 120k a year. These are all firms that would also benefit from people continuing to spend borrowed money.This survey is just silly.
MJ
saidI live in a small city and there are more stores closing (especially in the downtown) than opening - so this seems like a crock to me!
GVR
saidThe smart money would wait at least a full quarter before assuming anything has changed. Smells like an interest rate hike to me and it really does stink !
Gloria Devers
saidOh yes I see business optimism growing everywhere "Made in China" ! (sarcasm fully intended).
Len
saidThis is good news and certainly welcome news. Being a bit of a pessimist here - just hope that business does not try to make up for lost time by forcing interest rate hikes too quickly and too fast.
Fed up with this corpoate BS
saidDo any of these people work in the real world. optimism is quickly becomming a thing of the past for the average Joe out there making these idiots the bonuses. Gas prices are on the rise, therefore, FOOD, CLOTHING, SNACKS and just about everything else, is also on the rise. These jack didn't read the news lately, Sales will either stgnate or stop due to the rise in GAS. As for these companies doing any hiring Not Going To Happen, lease wise not for a salery that somme one can live on.
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