June 28, 2019 / 2:59 PM / a year ago

UPDATE 1-Canadian firms expect increase in sales growth -Bank of Canada survey

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By Kelsey Johnson and David Ljunggren

OTTAWA, June 28 (Reuters) - Canadian firms expect an increase in sales growth over the coming year thanks to healthy domestic and foreign demand as well as a low Canadian dollar, a Bank of Canada survey said on Friday.

Results of the central bank’s quarterly business outlook survey point to “a slight improvement” in sentiment after a moderation in the previous survey in April, it said.

The survey was released the same day as Statistics Canada reported unexpectedly strong economic growth in April, suggesting a recent slowdown is ending.

Of the companies surveyed, 44% expected sales to grow at a faster rate than in the past 12 months, while 21% predicted a lesser rate of sales growth. In the previous survey, the balance was 40% to 34%.

Most of the sales optimism is concentrated in central Canada. The increase in expectations, businesses said, comes despite ongoing weakness in the Western Canadian oil industry and continued uncertainty around global trade.

Foreign sales remain positive, spurred by a low Canadian dollar and sustained foreign demand, especially from the United States, respondents said.

Despite the optimism, most respondents said they anticipated the U.S. economy would grow more slowly than was expected in 2018, in part, because of trade tensions with China.

Friday’s business survey comes at a time of tense trade and diplomatic relations between Canada and China that has snagged several agricultural products, including canola, beef and pork in its crosshairs.

The Bank of Canada has expressed concern about the trade uncertainty, much of which has been caused by the current trade war between the United States and China.

The central bank raised interest rates five times between July 2017 and October 2018. It has since stayed on the sidelines citing the economic challenges posed by high levels of household debt, low oil prices and international trade tensions.

Reporting by Kelsey Johnson; Editing by David Ljunggren and Nick Zieminski

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