Canada Investment Optimism Falls to 4-Yr Low in BOC Poll

Canadian business optimism over new investments fell to a four-year low in a central bank survey that also showed improved predictions about future sales growth.

The balance of opinion for investment intentions declined to 7 percentage points from 9 in the Bank of Canada’s third-quarter survey of about 100 executives, extending a slide from a peak of 36 points three years ago. The balance of opinion for sales growth over the next 12 months rose to 31 percentage points from 9 points.

“Weak demand and uncertainty regarding future demand continue to weigh on firms’ investment decisions and near-term capacity planning,” the Ottawa-based bank said in the Business Outlook Survey taken Aug. 26 to Sept. 19.

Senior Deputy Governor Tiff Macklem last week cut the central bank’s economic growth forecast for the rest of the year because of an “elusive” pickup in exports and investment. The bank’s policy interest rate has been 1 percent since September 2010 and may not rise for another year according to a monthly Bloomberg economist survey released yesterday.

More companies expect inflation to be in the bottom half of the central bank’s 1 percent to 3 percent target band, the survey found. About 70 percent of respondents predicted inflation would be between 1 percent and 2 percent over the next two years, up from 64 percent in the last survey and the highest since 2001.

The consumer price index rose 1.1 percent in August from a year earlier, Statistics Canada said on Sept. 20.

Credit conditions were little changed in the third 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 saw tightening, was zero. “Most firms report that credit is currently easy or relatively easy to access, although a small number report firm-specific difficulties.”

A separate survey of senior lending officers had a balance of opinion of negative 7.3 percentage points, suggesting easier credit conditions. That measure has shown easing conditions every quarter since the end of 2009.

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