MNI 5 THINGS:BOC Biz Survey Points to Continued Optimism>

By Courtney Tower

     OTTAWA (MNI) - Following are the key points from Bank of Canada's 

Summer Business Outlook Survey published Friday: 

     - The survey points to "continued business optimism," with more 

reports of increasing pressure on capacity and prices. Firms came off a 

high-growth year and expect the next 12 months to show moderating but 

still-robust sales growth. The balance of opinion for future sales, at 

6, fell from 16 in the spring survey. Firms expect strong foreign and 

domestic demand, and improvements in commodity prices. The survey was 

conducted May 3 to June 5, but most interviews were done before the May 

31 U.S. announcement of steel and aluminum tariffs on imports  from 

Canada. 

     - Investment intention are "slightly weaker" than in the spring but 

"remain buoyant". Higher investment plans are "more prevalent in the 

services sector," the report said. "Several firms, often exporters, plan 

to reduce spending, having recently completed significant projects." But 

the balance of opinion in investment declined to 17 from 24 in the 

spring and firms "frequently reported that the regulatory environment is 

negatively affecting their investment plans." 

     - There are "widespread plans" to increase hiring over the next 

year, but "generally modestly." Some 56% of firms covered see higher 

employment versus only 5% expecting lower hiring, for a balance of 

opinion of 51. Hiring plans, often driven by expected sales growth, are 

broad-based across Canada but especially in service firms, the report 

said. "Several firms reported that labor shortages are limiting hiring." 

     - Reports of pressure on production capacity and labor shortages 

are "increasingly common," mostly outside the energy sector. For the 

fifth straight quarter, "firms reported that, on balance, labor 

shortages are more intense than they were 12 months ago," the report 

said. In addition, inflation expectations rose, although 90% of firms 

still expect inflation to stay within the Bank of Canada's target range 

of 1%-3%. But 58% now expect inflation to range between 2% to 3% over 

the next two years, the highest percentage since the first quarter 2012. 

     - Most firms reported no change in credit conditions. An 

accompanying survey of senior loan officers showed a lower demand for 

all types of mortgage-related borrowing, a trend "expected to continue 

in the next quarter." 

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

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