Canadian businesses expansion plans are being restrained by weak demand, with executives saying they’re waiting for signs of strength before making investments, according to a central bank survey.
The percentage of executives who said they would have some or significant difficulty meeting a surprise increase in demand dropped to 39 percent from 53 percent, the Ottawa-based Bank of Canada reported today in the quarterly Business Outlook Survey.
Companies reporting labor shortages that would limit their ability to meet demand fell to 26 percent from 31 percent.
“Firms continue to wait for signs of a notable strengthening in demand before proceeding with major expansions to increase capacity,” the report said.
Bank of Canada Governor Stephen Poloz has said the country’s exports and investment have been disappointing and the risks of inflation persisting below his 2 percent target have increased.
The bank’s policy interest rate has been at 1 percent since September 2010 and economists forecast it will stay unchanged next week and may remain that way into 2015.
The results are “slightly more encouraging for growth than might have been feared,” said Avery Shenfeld, chief economist at Toronto-based Canadian Imperial Bank of Commerce, in a note to clients. The figures are “a bit positive” for the Canadian dollar and “leaning against market talk of a rate cut ahead.”
Currency Strengthens
The Canadian dollar traded at 1.0875 per U.S. dollar at 11:12 a.m. in Toronto, 0.2 percent stronger than Jan. 10. One Canadian dollar buys 91.95 U.S. cents.
The currency weakened to a four-year low against its U.S. counterpart last week. Inflation expectations “are largely unchanged” in the survey, the bank said, with the share of companies predicting inflation will advance between 1 percent and 2 percent over the next two years falling to 68 percent from 70 percent.
Another 29 percent said inflation will range between 2 percent and 3 percent. The consumer price index rose 0.9 percent in November from a year earlier, according to Statistics Canada. The balance of opinion for sales growth over the next 12 months fell to 29 percentage points from 31 percentage points, the bank said.
While businesses reported improved readings for investment and exports, those factors “do not yet appear to suggest a significant strengthening,” the bank said.
Investment Intentions
The balance of opinion for investment intentions rose to 19 percentage points from a four-year low of 7 points in the last survey. For employment, the balance of opinion rose to 42 percentage points from 30.
Credit conditions were little changed in the fourth quarter, the central bank’s survey of executives showed. The balance of opinion, which subtracts the share of executives reporting easier conditions from those who expect tightening, was plus 3 percentage points.
The survey of about 100 executives was taken Nov. 18 to Dec. 12. A separate survey of senior lending officers had a balance of opinion of negative 10.8 percentage points, suggesting easier credit conditions. That measure has shown easing conditions every quarter since the end of 2009.
bloomberg.com
The percentage of executives who said they would have some or significant difficulty meeting a surprise increase in demand dropped to 39 percent from 53 percent, the Ottawa-based Bank of Canada reported today in the quarterly Business Outlook Survey.
Companies reporting labor shortages that would limit their ability to meet demand fell to 26 percent from 31 percent.
“Firms continue to wait for signs of a notable strengthening in demand before proceeding with major expansions to increase capacity,” the report said.
Bank of Canada Governor Stephen Poloz has said the country’s exports and investment have been disappointing and the risks of inflation persisting below his 2 percent target have increased.
The bank’s policy interest rate has been at 1 percent since September 2010 and economists forecast it will stay unchanged next week and may remain that way into 2015.
The results are “slightly more encouraging for growth than might have been feared,” said Avery Shenfeld, chief economist at Toronto-based Canadian Imperial Bank of Commerce, in a note to clients. The figures are “a bit positive” for the Canadian dollar and “leaning against market talk of a rate cut ahead.”
Currency Strengthens
The Canadian dollar traded at 1.0875 per U.S. dollar at 11:12 a.m. in Toronto, 0.2 percent stronger than Jan. 10. One Canadian dollar buys 91.95 U.S. cents.
The currency weakened to a four-year low against its U.S. counterpart last week. Inflation expectations “are largely unchanged” in the survey, the bank said, with the share of companies predicting inflation will advance between 1 percent and 2 percent over the next two years falling to 68 percent from 70 percent.
Another 29 percent said inflation will range between 2 percent and 3 percent. The consumer price index rose 0.9 percent in November from a year earlier, according to Statistics Canada. The balance of opinion for sales growth over the next 12 months fell to 29 percentage points from 31 percentage points, the bank said.
While businesses reported improved readings for investment and exports, those factors “do not yet appear to suggest a significant strengthening,” the bank said.
Investment Intentions
The balance of opinion for investment intentions rose to 19 percentage points from a four-year low of 7 points in the last survey. For employment, the balance of opinion rose to 42 percentage points from 30.
Credit conditions were little changed in the fourth quarter, the central bank’s survey of executives showed. The balance of opinion, which subtracts the share of executives reporting easier conditions from those who expect tightening, was plus 3 percentage points.
The survey of about 100 executives was taken Nov. 18 to Dec. 12. A separate survey of senior lending officers had a balance of opinion of negative 10.8 percentage points, suggesting easier credit conditions. That measure has shown easing conditions every quarter since the end of 2009.
bloomberg.com
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