MNI 5 THINGS:BOC Biz Survey Still Points to Positive Sentiment>

By Yali N'Diaye

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

Winter Business Outlook Survey published Friday: 

     - The Bank of Canada's quarterly Business Outlook Survey continued 

to point to "positive business sentiment and elevated capacity pressures 

in most regions". However, the tone of the survey was slightly less 

upbeat than the "robust" prospects reported last Fall, as the weakness 

in oil prices is taking its toll on firms in the energy sector. "For 

firms in the Prairies, the outlook has weakened," the survey said. 

     - Plans to increase investment and hiring are "widespread, 

especially in the services sector." The balance of opinion on labor 

shortage remains elevated, views that labor market pressures have 

intensified are less pervasive than in the Fall survey. The indicator of 

investment spending on machinery and equipment "receded slightly," 

although intentions remain "solid." 

     - The outlook for sales is softening, with firms expecting the pace 

of sales growth to stabilize over the next 12 months. The balance of 

opinion for future sales is now at -1%, down from 15% the previous 

quarter. However, the less robust outlook is not only related to lower 

oil prices or housing in some regions. The survey reported that "other 

businesses also anticipate a stabilization or slowdown" in the pace of 

sales growth. In particular, exporters' sales expectations have weakened 

"slightly", with some businesses expecting tariffs to mute the positive 

impact of positive U.S. economic growth. 

     - Tariffs are also expected to put upward pressure on input and 

output prices, along with rising labor costs. "Firms continue to report 

that various tariffs will add to cost growth, either directly or through 

supply chains." That being said, expected moderation in commodity prices 

should partly offset the upward pressure from tariffs and labor costs. 

Overall, inflation expectations are little changed, with 54% of 

respondents expecting inflation to range between 2% and 3% over the next 

two years, the upper range of the BOC's 1%-3% target range. 

     - On the financing front, credit conditions remain unchanged, 

although the indicator points to a "slight tightening." From the supply 

side, the Senior Loan Officer Survey noted that approval rates for 

mortgages declined in the fourth quarter. Such trend is not surprising 

given the combined tightening of monetary and macro prudential policies. 

Against this backdrop, demand decreased for all types of mortgages, with 

higher rate cited as the main reason by most institutions. 

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

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