Canada business outlook bright as rate hike looms

Mon Jul 12, 2010 12:13pm EDT
Email This Article |
Share This Article
  • Facebook
  • LinkedIn
  • Twitter
| Print This Article | Single Page
[-] Text [+]

By Louise Egan

OTTAWA (Reuters) - Canadian businesses remain upbeat in their outlook for sales, investment and hiring, but their optimism is tempered somewhat by fears that global uncertainty will hurt the economic recovery, a pair of surveys showed on Monday.

The results of the Bank of Canada's second-quarter business outlook survey and senior loan officer survey did not alter market expectations that the central bank will raise its key interest rate on July 20, but did reinforce some analysts' views that it may proceed very slowly in withdrawing emergency-level stimulus.

In the business survey, companies reported for the first time in two years that past sales activity had improved. But the balance of opinion on future sales -- the difference between the percentage predicting higher sales minus those expecting a drop -- fell to 24 percent from 44 percent in the first quarter.

"Overall, businesses are generally positive about their near-term sales prospects, although they are concerned about recent global economic and financial uncertainties and possible spillover effects in Canada," the central bank said in its report on the poll results.

The bank attributed the shifting mood on sales to the fact that some companies had already experienced a strong recovery and now expect the pace of growth to ease to more sustainable levels over the next year.

The survey showed a similar shift on future investment in machinery and equipment. However, the balance of opinion on future employment levels remained high and roughly unchanged from the first quarter.

In a sign that some slack in the economy is being absorbed, 39 percent of firms said they would experience varying degrees of difficulty in meeting an unexpected increase in demand, up from 30 percent in the first quarter.

Almost all expect inflation to remain within the Bank of Canada's target range of between 1 percent and 3 percent.   Continued...