January 25, 2010
Economic Snapshot
Bank of Canada’s business outlook survey is flashing green for growth in 2010
JOHN CLINKARD
consulting economist, CanaData
In its just released winter 2009-10 Business Outlook Survey, the Bank of Canada reports that the net number of firms expecting sales to improve in the next 12 months remains close to the record high reached in the third quarter of 2009.
According to the survey, a larger proportion of firms are expecting their sales to stabilize or exhibit modest growth, fuelled in many cases by an anticipated improvement in U.S. economic growth.
The net number of firms planning to boost their investment spending exhibited a sharp improvement in the fourth quarter, the survey notes.
This is consistent with the turnaround in after-tax profits in Q3/2009 and follows three quarters in which firms were hesitant about their investment plans.
This improvement in firms’ investment plans was accompanied by a further healthy increase in the net number of firms planning to take on additional staff, particularly in Western Canada and Ontario. The number of firms that have difficultly meeting unexpected increases in demand grew somewhat in the fourth quarter.
Most firms still have excess production capacity and anticipate this situation will last until mid-2010.
And a majority of firms reported that they were having no trouble with labour shortages and were easily able to access a large pool of skilled workers.
Despite the large proportion of firms reporting excess production capacity, the net number of firms expecting higher input prices over the next 12 months increased, as did the number of firms expecting higher output prices.
The net number of firms reporting an easing of credit conditions turned positive in the fourth quarter, for the first time since mid-2007.
The generally upbeat tone of this survey is consistent with the positive tone of other recent forward-looking economic indicators, including the Statistics Canada economic indicator and the seasonally adjusted Ivey Purchasing Managers Survey.
Together, they point to stronger growth in Canada over the near term.
John Clinkard has over 30 years’ experience as an economist in international, national and regional research and analysis with leading financial institutions and media outlets in Canada.
Future sales growth and investment in machinery and equipment
Data source: Bank of Canada/Chart: Reed Construction Data – CanaData.
