October 8, 2010 / 3:03 PM / 7 years ago

Bank of Canada surveys show business optimism

3 Min Read

OTTAWA (Reuters) - Canadian businesses are positive about future sales, investment and hiring, but expect economic growth to be modest, due in part to the flagging U.S. economy, two Bank of Canada surveys showed on Friday.

"Responses to the autumn survey suggest that the economic recovery is progressing," the central bank said in its report on the poll results. "Firms remain positive about the outlook over the next 12 months, but they generally expect growth to be modest, owing in part to a weaker U.S. economy."

Though bullish, the results of the central bank's autumn business outlook survey and its senior loan officer survey are unlikely to change the bank's view on interest rates.

Markets expect the bank to refrain from raising rates at its October 19 policy announcement date due to slew of economic data showing that the economic recovery is slowing after starting the year at a torrid pace. The bank has already raised rates three times this year.

In the business survey, companies reported an increase in sales growth in the past 12 months.

The balance of opinion on future sales -- the difference between the percentage predicting higher sales minus those expecting a drop -- rose to 29 percent from 24 percent in the second quarter. But that was still well below the 44 percent recorded in the first quarter.

The bank said that was largely due to ongoing uncertainties in the global economic recovery, with concerns shifting from Europe to the U.S. economy.

The survey showed a pickup in the mood on future investment in machinery and equipment.

The balance of opinion on future employment levels declined, but remained positive after being unchanged in the previous three months. Thirty-nine percent of firms said they expect to be hiring in the next 12 months, while 14 percent expected employment levels to fall.

In a sign that some slack in the economy is still being absorbed, 35 percent of firms said they would experience some degree of difficulty in meeting an unexpected increase in demand, down slightly from 39 percent in the second quarter.

Most companies see the inflation outlook remaining within the Bank of Canada's target range of between 1 percent and 3 percent, though the number expressing this view fell to 85 percent from 95 percent in the previous quarter.

Both business managers and bank loan officers said that credit conditions eased in the third quarter.

In the loan officer survey, financial institutions reported an easing in both price and nonprice conditions.

The improvement in lending conditions continued to spread across borrower categories, the survey said.

Reporting by John McCrank; editing by Peter Galloway

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