Canadian Business Sentiment Continues to Be Positive

Canadian firms remain upbeat about future sales, business investment and hiring even as the country faces stubborn economic uncertainties from outside its borders, a Bank of Canada poll suggested Monday.

The central bank’s latest business outlook survey—its quarterly poll of about 100 firms—found overall business sentiment has stayed positive and above historical averages, despite some signs the indicator crept down compared with January’s results, The Canadian Press reported.

But despite the still-optimistic expectations a number of respondents predicted some moderation ahead as the economy shifts to a more-sustainable pace following last year’s red-hot growth.

The results of the survey, conducted between Feb. 12 and March 9, will be carefully studied by the Bank of Canada ahead of its next decision on its trend-setting interest rate, which is scheduled for next week.

“Business sentiment continues to be positive, supported by healthy sales prospects,” the bank said in the report. “Due to recent strong demand, capacity and labor pressures are evident in most regions.”

Central bank Governor Stephen Poloz has raised the benchmark rate three times since last July, however, he’s expected to proceed cautiously due to trade and competitiveness challenges as well as signs Canada’s powerful economic performance of 2017 has cooled.

The survey found companies anticipated sales to grow at a faster pace over the next 12 months, but it noted several of the firms anticipated a moderation of activity following the strong performance of the past year. The responses often reflected expectations of a return to a more sustainable pace, the report said.

Senior managers at the polled firms also said they anticipated stronger sales overall from increasing US demand. However, some also said they expected protectionism and reduced competitiveness could limit the benefits they see from the improving American economy.

The country has faced considerable uncertainty surrounding the negotiation of the North American Free Trade Agreement and, more recently, the potential spillover effects of a growing trade dispute between the world’s two largest economies: the US and China.

In recent months, business leaders have also urged governments in Canada to take steps to ease the potential sting from new competitive disadvantages caused by recent tax and regulatory reforms in the US.

The Bank of Canada survey, however, said most firms reported that they had yet to see negative effects from recent US policy announcements themselves or the related uncertainty. It also found that most firms didn’t expect a clear impact over the coming 12 months.