BOC Biz Survey: Business Optimism Lower But Still Positive>

By Courtney Tower

     OTTAWA (MNI) - The Bank of Canada finds Canadian business to be 

generally less optimistic than it was in a high point reached three 

months ago but still planning to increase investment and hiring, it 

reported Monday. 

     And for inflation, "expectations moved up but remain modest 

overall," the BOC reported in its Autumn Business Outlook Survey. 

     Overall, of 100 representative firms surveyed, the BOC sees 

sentiment having decreased from the summer survey but remaining 

positive, noting "business sentiment continues to be healthy overall." 

     For inflation, 38% of firms expected it to rise to 2%-3% over the 

next year, the highest percentage since the fourth quarter of 2012, 

versus 24 in the summer survey. The percentage of firms expecting 

inflation between 1% and 2% was 55%, down from 70%, and the lowest 

percentage is this category since the fourth quarter of 2012. 

     Firms expecting to increase their investment on plant and equipment  

over the next 12 months "are somewhat less widespread than in the 

previous two surveys," the report said. The balance of opinion of those 

expecting to increase such investment declined to 17 from 29 in the 

summer survey, the lowest number since the second quarter of 2016. 

     Hiring intentions "fell back after surging in the summer survey," 

the report said. The balance of opinion on this was 34 versus 58 last 

time, the lowest such number since the second quarter of 2016. The 

actual numbers were 48% expected their hiring to increase over the next 

year, 38% expected it to remain the same, and 14% expected to reduce 

hiring. 

     In another key area, the balance of opinion for sales expectations 

over the next year was 19, versus 31 in the summer survey, the lowest 

such number since the third quarter of 2016. There were 42% that 

expected higher sales, 35% that expected the same level of sales, and 

23% expected lower sales growth. 

     The BOC said the overall positive sales prospects "rest on an 

ongoing turnaround of activity in energy-producing regions and 

supportive foreign demand." 

     The various questions routinely asked senior managers in interviews 

are taken together into one generalized Business Outlook Survey 

Indicator and it "decreased from its elevated level" in the summer. 

     However, the general result of the responses is that "business 

sentiment continues to be healthy overall," the report said. 

     Pressures on production capacity in this survey remain largely 

unchanged from three months ago. 

     "There is a widespread view that capacity pressures have increased 

over the past 12 months and, on balance, firms expect pressures to 

intensify over the next year," the report said. 

     "Firms are increasingly reporting that labor shortages are more 

intense than a year ago, pushing the indicator of labor shortage 

intensity to its highest level since the 2008-2009 recession," it said. 

Although reports point to a tightening of labor markets, "the number of 

firms judging that such shortages are limiting their ability to meet 

demand is unchanged and remains modest overall," it said. 

     "So far binding shortages are prevalent only in hot sectors  such 

as tourism, construction, and information technology," it added. And 

"some firms reported raising wages in response." 

     The survey also showed some caution remained, especially related to 

U.S. policies. In addition, "a couple of firms also expressed unease 

about the housing market outlook." 

     MNI Ottawa Bureau; email: yali.ndiaye@marketnews.com 

     [TOPICS: M$B$$$,M$C$S$]