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OTTAWA, Oct 7 (Reuters) - Canadian companies’ hiring and investment intentions improved modestly in the third quarter, while resource firms believe the sector may be bottoming out after prolonged weakness, the Bank of Canada said on Friday.
Expectations of sales growth over the next 12 months also improved modestly from the weak level seen in the previous survey, the Bank of Canada said in its business outlook survey. Still, the balance of opinion suggested that sales growth over the past 12 months had been flat.
Many resource-related businesses, including oil and gas companies, said they sense that activity has hit a bottom after two years of grappling with the impact of lower oil prices.
With the relative stabilization in commodity prices in recent months, firms now cautiously believe sales will no longer fall or will increase modestly, the survey said.
The bank surveys about 100 companies across size and industry and releases the results quarterly. The slight improvement in tone will be welcome for the bank, but it is unlikely to change expectations that the central bank will hold rates at low levels at least through next year.
Only a few firms expected a tangible boost in the near term from federal government stimulus spending, though some expected to benefit later as spending ramps up.
Foreign sales were expected to gain momentum in the coming year, supporting the outlook for exports, which is a key part of the Bank of Canada’s economic view.
The United States, Canada’s biggest trading partner, remained the main driver of firms’ positive prospects for exports, even though businesses expect U.S. growth to be slow overall.
The survey said this view was often related to uncertainty surrounding the outcome of the U.S. presidential election next month. Some firms said they had noticed recent softness in demand from U.S. clients due to that uncertainty.
Employment intentions improved from the low levels seen in recent surveys, with close to half of companies in the survey saying they intended to add positions over the next year.
Indicators of labor shortages moved up, suggesting that while there is still substantial slack in the labor market, it may have leveled off.
Firms’ intentions to invest in machinery and equipment also rose, though the scale of investment appears limited overall, the survey said.
Although capacity pressures were roughly unchanged, they were more widespread among firms benefiting from low commodity prices and the weaker Canadian dollar. (Reporting by Leah Schnurr; Editing by Phil Berlowitz)