Bank of Canada’s business outlook survey finds optimism

The autumn Business Outlook Survey from Bank of Canada has found some signs of improving business prospects, as resource-related activity appears to be gradually bottoming out and foreign demand is supporting firms’ sales expectations.

Bank Canada business outlook survey optimism

Bank of Canada’s business outlook survey finds optimism

Given the relatively stable commodity prices in recent months, resource-related firms now cautiously believe that sales will no longer fall or will increase modestly.

In the wider economy the outlook for exports remains supportive, said the central bank, as foreign sales are expected to gain momentum over the coming 12 months.

The United States is Canada’s biggest trading partner and remains the main driver of positive prospects for exports, although businesses generally expect U.S. growth to be slow overall. This view is often linked to the climate of uncertainty around the outcome of the presidential elections in November.

“In this context, some firms noticed a recent soft patch in demand for their products and services from clients south of the border,” the bank’s report said.

Meanwhile, both investment and employment intentions have improved, with cuts in the resource sectors coming to an end.

Pressures on production capacity are largely unchanged. Bank of Canada found that firms in the Prairies continued to report abundant spare capacity as sales volumes remain depressed by the downturn in the energy sector. Capacity pressures have become more widespread among firms benefiting from weaker commodity prices and the lower dollar, including many exporters.

“Although more businesses reported that they are approaching capacity limits due to strengthening demand, many would have no difficulty increasing output, mostly because weak past demand has left them operating below normal levels,” the bank explained.

The survey also found indicators of both input and output prices pointing to limited pressures due to diminishing exchange rate pass-through and intense competition.

Inflation expectations edged down, and credit conditions point to a marginal easing.

The Bank of Canada, BoC (French: Banque du Canada) is Canada’s central bank. The bank was chartered by and under the Bank of Canada Act on July 3, 1934, as a privately owned corporation. In 1938, the bank was legally designated a federal Crown corporation. The Minister of Finance holds the entire share capital issued by the bank. “The capital shall be divided into one hundred thousand shares of the par value of fifty dollars each, which shall be issued to the Minister to be held by the Minister on behalf of Her Majesty in right of Canada.”

The essential role of the bank, as Canada’s central bank, is to “promote the economic and financial well-being of Canada.” More specifically, the responsibilities of the bank are:

  • the formulation of monetary policy;
  • as the sole issuing authority of Canadian banknotes;
  • the promotion of a safe, sound financial system within Canada; and
    funds management and central banking services “for the federal government, the Bank and other clients.”

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