The difference between the percentage of managers who said they plan to expand their workforce in the next 12 months and those who plan to cut back was 46 points, the highest since the second quarter of 2012. The so-called balance of opinion on future sales growth fell to 27 percentage points from 29 points in the Bank of Canada’s Business Outlook Survey.
The results show “encouraging signs for the economic outlook, although responses indicate that headwinds from intense competition and domestic uncertainty persist,” the Ottawa-based central bank’s quarterly report said.
Governor Stephen Poloz has said the next move in his 1 percent benchmark interest rate depends on whether economic data confirm his forecast that exports and investment will pick up as companies benefit from stronger U.S. demand and a weaker Canadian dollar. Recent reports have shown inflation remaining below the central bank’s 2 percent target, as well as faster-than-expected employment and economic growth.
Business investment plans were little changed, the central bank said, with the balance of opinion rising to 21 points from 19 points. The measure was as high as 36 points in the third quarter of 2010.
“Many businesses continue to report that uncertainty - most often related to domestic demand or, in some cases, sector-specific or regulatory factors - is leading them to delay or shift the focus of their investment plans.”
The weaker Canadian dollar and stronger U.S. growth are supporting expectations of future sales growth, the central bank’s report said. The Canadian currency has fallen about 6 percent against the U.S. dollar in the last six months.
Inflation was expected to remain within the central bank’s 1 percent to 3 percent target band over the next two years by 93 percent of executives surveyed.
Some 45 percent said they would have some or significant difficulty meeting an unexpected rise in demand, up from 39 percent last quarter. The percentage reporting labor shortages fell for a second quarter, to 23 percent from 26 percent.
Credit conditions eased in the first 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 minus 8 percentage points, compared with plus 3 percentage points in the prior quarter. The survey of about 100 executives was taken Feb. 18 to March 13.
A separate survey of senior lending officers had a balance of opinion of negative 10.9 percentage points, suggesting easier credit conditions. That measure has shown easing conditions since the end of 2009.
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