BoC says uncertainty remains

Growth in the U.S. is helping lift the economy, but corporate Canada remains concerned about weak demand and domestic uncertainty, the latest business outlook survey by the Bank of Canada suggests.

OTTAWA — Growth in the U.S. is helping lift the economy, but corporate Canada remains concerned about weak demand and domestic uncertainty, the latest business outlook survey by the Bank of Canada suggests.

“The winter business outlook survey provides some positive signs for the economic outlook, notably for exports and investment, although responses do not yet appear to suggest a significant strengthening,” the bank said.

“For many businesses, weak demand and domestic uncertainty continue to temper sales expectations and expansion plans.”

The survey by the Bank of Canada, done between Nov. 18 and Dec. 12, found that 34 per cent of those surveyed saw sales growth over the last 12 months, while 37 per cent saw lower sales.

However, 51 per cent said they expected sales to improve over the next 12 months compared with 22 per cent who expected sales to fall.

The balance of opinion also suggested more firms expected to increase investment in hard assets and to hire more workers.

The survey found 42 per cent of firms expected investment spending on machinery and equipment to rise, while 23 per cent expect to spend less. Meanwhile, 53 per cent expect to hire more employees, while 11 expect to have fewer workers over the next 12 months.

The more optimistic outlook for the Canadian economy follows a weaker than expected jobs report last week that found 45,900 jobs were lost in December.

TD Bank economist Connor McDonald said the Bank of Canada survey results Monday were indicative of the cautious optimism that has been building in the economy.

“A stronger economic outlook for the U.S. will continue to support future sales and modestly drive Canadian growth.

“For the Bank of Canada, the moderate growth profile and well-anchored inflation expectations imply little reason to move off the sidelines in the near term.”

The business outlook survey results came as the central bank’s senior loan officer survey suggested a slight easing in overall business-lending conditions, continuing a trend since late 2009.

“The balance of opinion regarding the demand for credit from financial institutions during the fourth quarter tilted slightly toward an increase in demand, mainly from corporate borrowers,” the Bank of Canada said.

“This follows a reported decrease in demand from all categories of borrowers in the third quarter of 2013.”

The Bank of Canada is expected to make its next interest rate announcement and release its updated monetary policy report Jan. 22.

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