Firms still positive about future, but some see moderation ahead: central bank

The Canadian Press</span>
Published Monday, April 9, 2018 10:54AM EDT
Last Updated Monday, April 9, 2018 11:04AM EDT

OTTAWA -- Firms remain upbeat about future sales, business investment and hiring -- but some are predicting a moderation following last year's red-hot pace, the Bank of Canada's latest business outlook survey said Monday.

The central bank's quarterly poll of about 100 firms found overall business sentiment remained positive and above historical averages, even though the indicator dipped somewhat compared with January.

"Forward-looking sales indicators remain positive across most regions and sectors. Some firms expect a moderation in sales activity from high levels in the past year," the report said.

"Although less so than in recent surveys, intentions to increase investment continue to be widespread. Employment intentions are solidly positive, based on firms' plans for hiring to support expected sales growth or to expand operations."

The survey, conducted between Feb. 12 and March 9, was released about a week before the Bank of Canada's next decision on its trend-setting interest rate.

Central bank governor Stephen Poloz has raised the benchmark rate three times since last July, however, he's expected to proceed cautiously due to trade and competitiveness challenges as well as signs Canada's powerful economic performance of 2017 has cooled.

The survey found companies expected sales to grow at a faster pace over the next 12 months, but it noted several of the firms anticipated a moderation of activity following the strong performance of the past year. The responses often reflected expectations of a return to a more sustainable pace, the report said.

Firms polled also anticipated stronger sales overall from increasing U.S. demand. However, some also said they expected protectionism and reduced competitiveness could limit the benefits they see from the improving American economy.

The report said most firms still planned to boost investments in machinery and equipment over the next year, although the indicator edged down compared to its reading in the January survey. The responses showed plans for greater spending were most widespread in the services sectors.

The poll also found hiring intentions increased -- and were widespread across regions and most sectors -- amid continued concerns that labour shortages had intensified over the last year.

"Labour-related constraints continue to be the most-prevalent obstacle to scaling-up operations in response to an unanticipated increase in demand," the report said.

"On balance, firms anticipate capacity pressures to further intensify over the next 12 months, pushed by strong sales prospects and expected difficulties finding labour."

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