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MNI DATA IMPACT: BOC: Firms Near Capacity, Investment Slows>

By Greg Quinn and Anahita Alinejad
     OTTAWA (MNI) - Canadian businesses have little room to handle fresh 
demand as trade tensions ease, while also reporting the lowest 
investment plans in more than three years amid slower sales forecasts, a 
Bank of Canada survey showed. 
     The Business Outlook Survey's summary indicator climbed to +0.7 
from +0.4 in the third quarter and -0.1 in the second, the Ottawa-based 
central bank said Monday from Ottawa. It's the last major report 
expected from the BOC before a Jan. 22 interest-rate decision, where 
investors predict Governor Stephen Poloz will hold the G7's highest 
policy interest rate at 1.75%.
     "Business sentiment is broadly positive" outside of Canada's 
western prairie provinces, the BOC said, where energy companies are 
struggling. "Indicators of capacity pressures suggest that economic 
slack has been absorbed and that labour markets have tightened," outside 
of that region, the report said. 
     The tone of the report mirrors Poloz's view the economy is around 
full capacity and inflation will hold around his 2% target. The BOC's 
new consumer outlook survey published Monday backed that up, showing 
households expected inflation of 2.1% in the fourth quarter and 2.2% 
around the end of this year. 
     More companies also reported they would have trouble meeting rising 
demand for a third consecutive quarter, the outlook survey showed. 
     Still, some of the most prominent figures in the business report 
showed marginal weakness. The balance of opinion on future sales growth 
fell to 11 from 23. The measure subtracts the share of respondents 
seeing a slowdown from those calling for faster gains. 
     Investment opinions declined to 11 from 28, the lowest in 3-1/2 
years, the business survey showed. That was somewhat countered by a 
rebound in hiring plans, a relief given a plunge in November's job 
report before a partial rebound in December.
     The share of executives seeing the inflation rate at or below the 
BOC's 2% target over the next two years fell to 61% from 66%. 
     The consumer survey showed imbalances around household finances 
that have deterred the BOC from matching a wave of global interest-rate 
cuts remains. The data back to 2014 showed a pattern of families 
expecting spending growth to exceed income gains, a gap that widened in 
fourth quarter figures. 
     Consumers also saw home prices running much faster than overall 
inflation around Toronto and Vancouver, where lawmakers have stepped 
into curb speculation and Poloz warned last week he's watching for 
signs of froth to emerge again. Ontario prices were seen gaining 5.1% 
and British Columbia prices by 4.8%.
     The BOC surveyed about 100 business leaders between Nov. 13 and 
Dec. 9. The companies are chosen so that they represent the 
composition of gross domestic product. The consumer survey was done from 
Nov. 11 to Nov. 29 and is based on a rotating panel of about 2,000 
- MNI Ottawa Bureau; +1-613-314-9647;
     [TOPICS: M$B$$$,M$C$S$]

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