OTTAWA – Canadian firms appear to be preparing for hard and uncertain economic times, the Bank of Canada says in a business outlook survey released Monday.
The bank’s quarterly survey of top executives at 100 firms across the country shows a corporate sector that is far more concerned about the future than it was only three months ago, and planning accordingly.
The survey shows a general tempering on expectations for sales, investments and hiring, the bank said.
There was one positive in the results, as firms and loan officers reported generally easing credit conditions, but it is doubtful many business will be taking advantage.
“The results of the autumn survey suggest that, in an environment of slow global economic growth and uncertainty about demand, firms have tempered their expectations for business activity,” the bank said.
“Firms are generally more circumspect about near-term investment decisions and are focusing on minimizing costs.”
The central bank said firms exposed to the weak global economy were the most likely to report diminished expectations for future sales, particularly those in the manufacturing sector.
Meanwhile, commodity demand and the steady domestic economy were factors for optimism among executives, the bank said.
The survey findings are expected to play a role in the central bank’s upcoming monetary policy decision and new economic forecast, both of which will be released next week. Most economists are anticipating governor Mark Carney to keep interest rates unchanged, while lowering expectations for growth even further.
On most questions in the survey released Monday, business executives were more pessimistic than they had been three months ago.
On sales expectations, there were as many who anticipated volumes to slow from the pace of the previous 12 months as pick up — only the second time since mid-2009 that expectations were not positive.
On investment intentions, a key marker for economic growth, the results were only marginally better: 37 per cent said they planned to increase the pace of investment in the next 12 months, while 29 per cent said they plan to spend less.
The eight percentage point positive balance of opinion was one-third the level of the July survey.
More firms said they intended to add workers over the next 12 months than those that planned to reduce staff, but even here the balance of opinion in favour of hiring was half as strong as in the summer survey.
“Intentions to increase employment softened in all regions,” the bank said. “A number of firms cited productivity gains from recent capital projects, efforts to reduce costs or demand conditions as factors influencing their hiring intentions.”
Somewhat surprisingly, a slightly higher percentage of firms reported that labour shortages were restricting their ability to meet demand. Those firms tended to be in central and eastern Canada and said the difficulty rested in finding workers with specific skills.