Bank of Canada Business Outlook Survey for Spring 2018
Results of the spring Business Outlook Survey suggest that business sentiment continues to be positive, supported by healthy sales prospects. Due to recent strong demand, capacity and labour pressures are evident in most regions.
• Forward-looking sales indicators remain positive across most regions and sectors. Some firms expect a moderation in sales activity from high levels in the past year or a gradual slowing of the pace of the recovery in the energy sector.
• While firms’ expectations for US economic growth have strengthened further, some cited rising protectionism and reduced competitiveness as factors limiting the impact on their sales (Box 1).
• Although less so than in recent surveys, intentions to increase investment continue to be widespread. Employment intentions are solidly positive, based on firms’ plans for hiring to support expected sales growth or to expand operations.
• Indicators of capacity pressures and labour shortages edged down but are still close to recent high levels. Remaining economic slack appears to be mostly concentrated in the energy-producing regions.
• Despite expectations for faster input price growth overall, on balance, firms continue to anticipate only modest acceleration in the growth of their output prices due to competitive pressures. Partly driven by rising labour costs, inflation expectations picked up but are still well within the Bank’s inflation-control range of 1 to 3 per cent.
• While credit conditions were unchanged for most firms, the indicator points to a slight tightening.
• The Business Outlook Survey indicator continues to be high, signalling positive business sentiment.
Building on a reported further strengthening of sales growth over the past 12 months (Chart 1), firms expect sales to grow at a faster pace over the next 12 months (Chart 2, blue bars). Among those anticipating faster sales growth, several reported focusing on their product offerings and strategies to reach new customers, including increasing their online presence. As well, firms across all regions and sectors saw an overall improvement in indicators of future sales, such as order books and sales inquiries (Chart 2, red line), albeit to a lesser extent in the Prairies.