OTTAWA – The Bank of Canada’s latest sampling of business sentiment shows company confidence in the economy is turning decidedly positive, and that may be good news for Canadian workers.
The influential quarterly survey of 100 representative firms shows that hiring intentions in March were the most positive in almost two years, with executives also pointing to higher sales over the past year and better prospects for future sales.
“Responses to the spring survey suggest than an improving U.S. economy and the recent depreciation of the Canadian dollar, together with firms’ efforts to create new opportunities, are helping to support expectations for better growth prospects ahead,” the bank said in a summary of the survey results.
The relatively sunny report appeared to boost markets as the dollar flipped from negative to positive following the 10:30 a.m. release. It was up 0.10 cents to 91.17 cents US at middday.
The findings are generally in line with improving confidence about the Canadian economy in general. Many economists now forecast a spring rebound in growth following the weather-related dip in the winter, with expansion continuing at a modest pace throughout the year.
“The increasing optimism of Canadian businesses is a good sign of where the Canadian economy will be heading over the next year,” said TD Bank economist Connor McDonald.
“A strong economic outlook for the U.S. and a weaker loonie will continue to support future sales and help drive modest Canadian growth.”
It was not all positive. Firms took note of the “strong competition” they face, which should temper sales growth, and that the higher prices that they expect for inputs won’t be fully passed along to customers.
The survey, which takes the temperature of business sentiment across a number of fronts, was conducted between March 10 and 17 and is sometimes cited by the central bank in its economic forecasts and interest rate setting decisions.
In a recent statement, Bank of Canada governor Stephen Poloz said he would pay more attention to anecdotal evidence and such surveys to inform the central bank’s outlook.
Analysts said, however, they didn’t think the survey results were strong enough to change the bank’s neutral stance on interest rates and added that the most likely date for a Bank of Canada rate increase is still a year off.
In the details, the spring survey found modestly positive sentiment about activity going forward, but also reported an improvement in sales the past 12 months, reversing a negative response three months ago. Sales volumes rose at a higher pace over the past year for 44 per cent of respondents, as opposed to 30 per cent who held the opposite view — a positive balance of opinion of 14 points.
The balance of opinion was also positive on expectations for sales increases going forward and on a topic the central bank considers critical — expectations for spending on machinery and equipment.
The balance of opinion on hiring was also solidly in the black, with 53 per cent saying they expected to add employees as opposed to only eight per cent who expected staffing levels to drop off. The 45-point balance of opinion for the positive was the highest in almost two years.
“Firms planning to increase employment cite a somewhat improved sales outlook or hiring associated with their initiatives to drive growth,” the bank said.
If borne out by reality, this would be welcome news to Canadian workers who have experienced at best a tepid labour market in the past year or so.
Despite a pickup in production capacity pressures, firms reported lower levels of labour shortages or skills mismatches, backing up a recent Parliamentary Budget Officer report on the controversial subject. The bank said shortages were restricted to hiring for specific positions, skill sets or regions.
Coincidentally, the Bank of Montreal said Monday stronger U.S. demand will likely help lift Ontario’s economy to 2.3 per cent growth this year, from 1.4 per cent last year. For Toronto, the bank said country’s largest city could realize employment gains of 230,000 jobs by the end of 2017.