Bank of Canada Finds Business Plans More Investment and Jobs

Canadian hiring and investment plans rebounded from the lowest since 2009 as exporters benefit from a lower dollar, a quarterly central bank survey found.

Executives planning to increase investment in the next 12 months outnumbered those planning a decline by a 39 percent to 30 percent margin, the Bank of Canada reported Friday, with the remainder planning no change. The 9-percentage point balance of opinion in the first quarter was up from minus 3 at the end of last year. The balance of opinion on hiring plans rose to 26 percentage points, from 12 points in the fourth quarter.

While companies, particularly exporters, are benefiting from a weaker dollar, the Bank of Canada also cautioned the picture is less rosy for companies reliant on commodities and domestic sales. Energy companies still suffer from low crude oil prices, and continue to scale back investments, it said.

“Firms’ perspectives continue to diverge sharply, depending on whether they are tied to the commodity sector and on their exposure to foreign demand,” the central bank’s report said.

The dichotomy between commodities and the non-energy export sector has featured in the central bank’s narrative the last 12 months. The central bank’s key lending rate has been 0.5 percent since cuts in January and July of 2015 and Governor Stephen Poloz backed off another reduction earlier this year citing signs of a recovery.

The survey’s balance of opinion for sales growth over the next year was unchanged at plus 16 for a third consecutive quarter.

Annual consumer price inflation will advance between 1 percent and 2 percent over the next two years according to 60 percent of responses, down from 70 percent in the last survey. The central bank sets interest rates to keep inflation in the middle of a 1 percent to 3 percent band.

A separate survey of lending officers showed credit conditions tightened, with a reading of positive 6.6.

The senior loan officer survey gathered responses from March 7 to March 11. The business survey polled about 100 executives from Feb. 11 to March 7.

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