OTTAWA – The Bank of Canada says the majority of companies polled in its latest business outlook survey have reported increasingly tangible benefits since the oil price shock started to drive down the Canadian dollar.
The central bank’s quarterly survey of about 100 Canadian firms revealed Friday that, in most cases, the weaker loonie has helped exporters such as manufacturers boost their margins through products sold abroad.
The bank also found some of the surveyed companies have enjoyed less competition from their U.S. counterparts, while others have reaped benefits from increased tourism in Canada.
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However, some firms have faced significant pressure in cases where a large portion of their costs for inputs and equipment were priced in U.S. dollars, the poll indicated.
The bank’s survey also said that many companies view the stubbornly low oil prices as a big negative for their outlooks, particularly businesses in the energy sector and firms closely connected to it, such as equipment manufacturers.
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“Firms’ perspectives continue to diverge sharply, depending on whether they are tied to the commodity sector and on their exposure to foreign demand,” the Bank of Canada said.
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“Expectations for future sales growth remain positive, with clear signs of support from U.S. demand. Yet the outlook for domestic sales is guarded in light of sluggish demand and the ongoing adjustment to lower oil prices.”
The survey also found investment and employment intentions among businesses have increased since the January poll, but remain modest. Once again, the bank said, there was a sharp divergence in opinion depending on how closely tied the company was to the energy industry.
From its interviews, the bank said the negative effects from the oil slump seemed to be levelling off, though companies close to the energy sector still “face a difficult environment.”
The survey results also found that planned layoffs and hiring freezes remained “disproportionately high” among respondents in the oil-rich Prairies.
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The report said while capacity pressures ticked upwards, few companies were concerned about facing major obstacles in meeting an unanticipated jump in demand.
The bank described the poll results as “improved” but “subdued overall.”
“The positive impetus coming from the sustained foreign demand continues to be largely offset by the persistent drag and spillovers from the oil price shock,” it said.
The Bank of Canada has indicated that the economy has been undergoing a complex adjustment ever since the exchange rate began to tumble in mid-2014 along with the steep drop in world crude prices.
Lynn Patterson, the central bank’s deputy governor, said in a speech Wednesday the bank’s “best guess” is that it will take more than two years for Canada to fully adjust to the commodity price plunge.
Patterson said sliding oil and other commodity prices have translated into losses of about $1,800 for every Canadian.
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