–Expectations Of Future Sales Growth Decline From Previous Quarters
–Hiring Intentions, and Capital Investment, Stay Strong

By Courtney Tower

OTTAWA (MNI) – Canadian businesses expect modest growth for
themselves over the next year, but at a slower pace than in the past
year as concerns over the Europe crisis and weak United States demand
dampen sales prospects.

The Bank of Canada, in its winter Business Outlook Survey, a
must-read for those gauging Canada’s economic outlook and BOC interest
rate policy, reports declining expectations of future sales growth from
previous quarters.

Now, 41% of the 100 representative firms interviewed expect their
sales volumes to increase at a slower pace than in the past year, versus
37% that expect higher sales. However, 22% expect the same sales growth
as in the past year, a year that the BOC described from past surveys as
“robust” and as “strongly positive.” That would make 59% expecting
better or the same prospects as in their past good year.

In the survey taken November 14-December 14, 2011, firms still
intend to increase investment in plant and equipment — 40% to increase
it, 41% to spend the same, and 19% to spend less. The reasons for
increasing investment are given as efforts to reduce costs, seize new
opportunities or reposition through expansion, the report said.

On another key indicator, following a decline in the autumn survey,
the private sector employment picture for the year ahead would seem to
be positive. They survey gives 54% as expecting to higher more employees
and 37 to stay the same, with only 9% expecting to reduce employee
numbers.

Opinion as to their sales over the past 12 months “remains strongly
positive,” the survey says. Especially, firms in Western Canada and
those tied to commodities reported “robust sales over the past 12
months.”

The Western Canada theme of business strength is repeated
throughout the survey. “Capacity pressures continue to be more evident
in Western Canada than elsewhere,” the report says. Firms reporting
“significant difficulty” in meeting unexpected increases in demand were
“heavily concentrated in that region.” However, these were only 10% of
those surveyed, while those expecting “some difficulty” totalled 36%.

On prices and inflation, firms expect the costs of their inputs to
rise at about the same rate as over the past 12 months. On output
prices, the balance of opinion is “modestly negative for a second
quarter, suggesting that firms expect their output prices to increase at
a slower rate over the next 12 months.”

The general outlook, and in particular the unchanged outlook from
previous recent surveys on expecting mild inflation, may support the
Bank of Canada in its repeated stance of not altering the benchmark
1.0% key policy rate it has maintained since September 8, 2010.

Economists expect the Bank to continue to maintain that rate
through most of this year and some until will into 2013. They may not
see much in this report to change the BOCs mind.

A separate survey of major Canadian business-lending institutions
indicates almost no change in overall business-lending conditions in the
fourth quarter last year, a slowdown from several consecutive previous
quarters of easing credit conditions for business borrowers. There was
no improvement in the prices charged borrowers, and some easing of
non-price conditions.

** Market News International Ottawa **

[TOPICS: M$C$$$,MAUDS$]