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Businesses in Canada the most optimistic they’ve been in 6 years: poll

The Bank of Canada says business sentiment has reached its highest level since 2011.
The Bank of Canada says business sentiment has reached its highest level since 2011.

OTTAWA – The Bank of Canada says business sentiment has reached its highest level since 2011 with corporate expectations for key areas like future sales, investment and hiring intentions all above historical averages.

The findings Friday in the bank’s forward-looking, quarterly survey of Canadian firms fuelled growing expectations the bank will start hiking its benchmark interest rate next month.

The combination of the strengthening economy and recent, “more-hawkish” comments by governor Stephen Poloz have fed speculation the bank will increase its rate for the first time in seven years as soon as July 12.

“Results for nearly all the (business outlook survey) survey questions are above their historical averages, pushing the indicator to its highest level since 2011,” the bank said, referring to its measure that summarizes all the responses in its survey of about 100 Canadian companies.

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“This result provides clear evidence of a generalized improvement in business sentiment.”

The survey found that since April the measure that gauges business hiring intentions for the coming year accelerated to reach its highest level on record.

“The balance of opinion on employment intentions over the next 12 months increased significantly,” the bank said.

“Firms most frequently mentioned the need to keep up with strong demand and plans to expand their business.”

The poll also showed companies expect sales growth to continue improving over the coming year, while business investment intentions for the next 12 months also remain elevated.

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Overall, the positive business outlook has been spreading across industries and regions, the bank said.

Canada has been enjoying a stronger-than-expected run of economic data since the start of the year in key areas such as growth, trade and the job market.

Statistics Canada unveiled the latest promising data point Friday – a reading that showed the economy grew 0.2 per cent in April.

The pair of fresh indicators added to analyst expectations that the central bank would serve up a rate increase in less than two weeks.

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National Bank chief economist Stefane Marion said Friday that he believes the strong results in the business outlook survey prompted Poloz to give a “bullish” media interview earlier in the week.

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Poloz reasserted his position that the bank’s 2015 interest-rate cuts appeared to have done their job to help offset the negative effects of the oil-price shock on the broader economy.

The central bank governor also noted the economy enjoyed “surprisingly” robust growth in the first three months of 2017 and that he expected the pace to remain above potential.

In a note to clients, Marion underlined the outlook survey’s assessment that “capacity pressures together with rising indicators of labour shortages suggest that slack (in the economy) is being absorbed.”

“With many of the survey’s forward-looking components of economic activity at or near record highs, we see no reasons for the (Bank of Canada) to hold off from raising rates in July,” Marion wrote.