Highlights of the BOC business outlook survey and senior loan officer survey

  • Capacity pressure indicator moderated but firms see capacity pressures intensifying over the coming 12 months
  • Labor constraints continue to be most prevalent obstacle to firms scaling up operations
  • Economic slack appears to be mostly concentrated in energy-producing regions
  • Inflation expectations over the next two years picked up, over half of firms expect inflation to be in upper half of 1-3% range
  • Investment intentions edge down but continue to point to increase in next 12 months
  • The share of firms anticipating strong economic growth in the United States in the next 12 months is near record-high levels.
  • 20.9% of firms said US changes have had unfavorable impact vs 19.8% prior

Balance of opinion:

  • BOS indicator 1.96 vs 2.48
  • Employment intentions +45% vs +40%
  • Investment +24% vs +29%
  • Futures sales +16% vs +8%
  • Past sales +20% vs +20%
  • Capacity -9%
  • Intensity of labor shortages diminishes
  • Expect higher inflation 22% vs 26%
  • 56% see inflation 2% or higher compared to 38% prior

Senior Loan Officer survey:

  • Overall business lending conditions eased slightly in Q1
  • Household lending conditions tightened in Q1 due to changes to mortgage rules

The higher inflation expectations stand out for me but that may be due to the bump in minimum wages. Here's what the BOC said:

"Firms cited rising labour costs (due to tighter labour markets and, to a lesser extent, minimum wage increases) and higher prices for some commodities as the main factors influencing expectations," the release said.

The Canadian dollar is at the best levels of the day. Most of that is this survey but a portion is also due to a cryptic comment about North American currency coordination from Larry Kudlow.