Canada companies' economic outlook sours: poll

Mon Apr 14, 2008 12:34pm EDT
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By Louise Egan

OTTAWA (Reuters) - Canadian businesses are gloomier about the near-term future due to a slowing economy and tighter credit conditions, and are concerned about the rising costs of energy and food, a survey showed on Monday.

The Bank of Canada survey of companies between February 22 and March 20 supports the view that more interest rate cuts are needed to keep the economy out of recession as it gears down.

"If anything, it kind of confirms the trajectory they're on and it does suggest the Bank of Canada will remain in an (credit) easing mode," said Charmaine Buskas, senior economics strategist at TD Securities.

The bank has cut its overnight lending rate by one percentage point since December to 3.5 percent and the majority of primary securities dealers surveyed by Reuters expect it to shave a half-point off the rate for the second straight time next week.

The survey showed the balance of opinion on sales growth was negative for the first time since 2001, meaning the number of firms expecting sales volume to decrease is greater than the number expecting an increase.

The poll also revealed a marked decrease in the number of companies expecting labor shortages and capacity constraints, suggesting the days of frothy domestic demand and unexpectedly strong job creation may be coming to an end.

The central bank said the shift in sentiment from the fourth quarter was marginal, however.

"While the weaker U.S. economic situation is weighing more heavily on the outlook, firms are not experiencing a marked change in the pace of business activity," the bank said in its summary of the poll findings.   Continued...

<p>The Toronto city skyline, normally aglow with lights from office buildings, is seen dark during Earth Hour in Toronto, March 29, 2008. REUTERS/Mark Blinch</p>