Canadian business mood upbeat; housing starts dip

Mon Apr 12, 2010 5:31pm EDT
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By Ka Yan Ng

TORONTO (Reuters) - Economy recovery in Canada is staying on track, reports on Monday showed, with businesses upbeat about hiring intentions and expansion, and the three-month trend for housing starts displaying strength.

The Canadian dollar headed back toward parity with the greenback after a pair of surveys done by the Bank of Canada showed the optimistic business mood, and after Finance Minister Jim Flaherty repeated that the recent rise of the currency has been "relatively orderly".

In the Bank of Canada surveys, businesses said they are preparing to expand and to hire more workers. Also, twice as many of them now see inflation at the high end of the central bank's target range of 1-3 percent than did so late last year.

"Responses to the spring survey provide further evidence that the recovery is taking hold," the bank said.

In a separate survey, senior loan officers at the country's major banks told the Bank of Canada that business lending conditions had eased in the first quarter, both in terms of pricing and availability.

The survey results focused renewed interest on the Canadian dollar, pulling it to a North American session high of C$1.0011 to the U.S. dollar, or 99.89 U.S. cents, about a third of a cent higher from before the surveys were published and Flaherty made his comments.

The survey results may also tilt the balance slightly toward an earlier than expected interest rate hike by the Bank of Canada, although analysts are divided on that possibility.

Scotia Capital economist Derek Holt said the central bank is likely to "look favorably" on the pair of surveys. Scotia recently moved up its forecast for the bank's first rate hike to June 1.   Continued...