Canadian businesses have nothing to fear, according to the Bank of Canada’s latest business outlook survey.

It finds, “the outlook of businesses hasn’t changed materially from [our] spring survey. [Current] responses suggest a more modest improvement in past sales activity, [but] expectations for future sales growth remain positive.”

Also, says the bank, “there are indications that business sentiment regarding exports is gradually firming…[and] fewer firms anticipate difficulty meeting an unexpected increase in demand.”

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However, the BoC notes, “Firms expect input prices to rise at a somewhat slower pace than over the last 12 months, as upward pressure from the recent depreciation of the Canadian dollar gradually dissipates. [As well], strong competition continues to restrain expectations for output prices.”

In response to the survey, CIBC World Markets economist Avery Shenfield has stated in a release, “[This] softer set of readings from the [BoC] will be seen as providing some support for [the bank] maintaining its dovish stance. [That’s] more critical these days given the run-up we’ve seen in recent core [Consumer Price Index] figures.”

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He adds, “The balance of opinion on employment and growth is still decidedly positive, but less so that in the [bank’s] Q1 survey, with the plusses and minuses on employment growth retreating to the softest net balance since Q4 2012.”

On the bright side, says BoC, firms with global sales exposure have indicated, “Sales momentum [should] continue to improve compared with a year ago,” says the bank, which adds, “Firms expect a further strengthening of the U.S. economy, and some businesses note that the lagged effects of the depreciation of the Canadian dollar are also supporting sales expectations.”

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The report suggests smaller businesses are more likely to hire new employees, while all companies are expected to look at upgrading technology and machinery over the next 12 months.

When it comes to inflation, says Shenfield in his release, “[The bank’s] expectations for future inflation remain very well grounded, and not materially changed from the Q1 survey…Inflation [may] run in the 1% to 2% range, [rather than the] 2% to 3% range.”

He adds, “The one encouraging note is an increase in the balance of opinion on machinery and equipment outlays, one of the areas where the bank is looking for momentum to supplant housing and consumption.

“Separately, the BoC’s survey of lending officers show lenders reporting a further easing in lending conditions in terms of both price and non-price dimensions. Still, the softer outlook survey results will weigh on the Canadian dollar a bit today, and perhaps be a small plus for short-dated bonds.”


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