Businesses Grappling with Weak Demand, Uncertainty: Bank of Canada Survey

Business was slow for Canadian firms over the last year, but there may be hope for slight improvements.
Businesses Grappling with Weak Demand, Uncertainty: Bank of Canada Survey
The graph shows Canadian firms’ response to the question “Over the past 12 months, did your firm’s sales volume increase at a greater, lesser, or the same rate as over the previous 12 months?” on a quarterly basis since 2001. The graph shows the “balance of opinion,” defined as the percentage of firms reporting faster growth minus the percentage reporting slower growth. (Bank of Canada)
Omid Ghoreishi
10/16/2013
Updated:
10/16/2013

Business was slow for Canadian firms over the last year, but there may be hope for slight improvements, Bank of Canada’s latest quarterly Business Outlook Survey shows. 

“Weak demand and uncertainty regarding future demand continue to weigh on firms’ investment decisions and near-term capacity planning,” Bank of Canada said in a report releasing the autumn survey results. 

According to the survey, which involved about 100 firms, Canadian businesses in general reported slower or negative sales growth over the past 12 months. A key factor limiting sales was the weakness in domestic demand, the respondents said. 

With the recovering U.S. demand, however, firms expect that over the next 12 months sales growth will not deteriorate further or will even have modest improvements. Firms caution that the benefits will be limited as it is expected the growth in the U.S. economic activity will remain slow.

A slight majority of firms intend to invest in machinery and equipment, but many remain uncertain of future prospects and are postponing some projects. 

“While waiting for evidence of a strengthening in demand before expanding capacity, firms are relying on existing capacity more intensively over the near term,” the report said. 

A majority of firms also still intend to increase their workforce, although the number intending to hire has gone down compared to the last quarter. Firms looking to hire are generally looking for certain skills or positions to meet operational needs. 

The survey also showed that most firms expect overall price pressures to be subdued over the next 12 months.