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OTTAWA, July 7 (Reuters) - Fewer Canadian firms expect to have difficulty meeting a surge in demand than did in the first quarter, the Bank of Canada said on Monday in a sign that pressures on production capacity are lessening rather than building.
The central bank's quarterly Business Outlook Survey said overall business sentiment was little changed in the second quarter, with expectations for sales growth remaining positive and indications that business export sentiment is gradually firming.
On production capacity, however, it said: "The pickup in sales activity anticipated in recent surveys has been slow to materialize, and firms have been making shorter-term investments to better utilize and upgrade their existing capital." The number of firms predicting difficulty in meeting unanticipated demand fell to 34 percent from 45 percent in the first quarter.
The Bank of Canada watches the output gap closely for any signs of inflation building. The survey also reported little change in the percentage of firms facing labor shortages, 22 percent in the second quarter. (Reporting by Randall Palmer; Editing by Peter Galloway)