Bank of Canada business survey finds more optimism for hiring, spending

The Bank of Canada’s latest sampling of business sentiment shows company confidence in the economy is turning decidedly positive, and that may be good news for Canadian workers.

The influential quarterly survey of 100 representative firms shows that hiring intentions in March were the most positive in almost two years, with executives also pointing to higher sales over the past year and better prospects for future sales.

“Responses to the spring survey suggest than an improving U.S. economy and the recent depreciation of the Canadian dollar, together with firms’ efforts to create new opportunities, are helping to support expectations for better growth prospects ahead,” the bank said in a summary of the survey results.

The findings are generally in line with improving confidence about the Canadian economy in general. Many economists now forecast a spring rebound in growth following the weather-related dip in the winter, with expansion continuing at a modest pace throughout the year.

The survey, which takes the temperature of business sentiment across a number of fronts, was conducted between March 10 and 17 and is sometimes cited by the central bank in its economic forecasts and interest rate setting decisions.

In a recent statement, Bank of Canada governor Stephen Poloz said he would pay more attention to anecdotal evidence and such surveys to inform the central bank’s outlook.

The spring survey shows positive sentiment about activity going forward, but also reported an improvement in sales the past 12 months, reversing a negative response three months ago. Sales volumes rose at a higher pace over the past year for 44 per cent of respondents, as opposed to 30 per cent who held the opposite view — a positive balance of opinion of 14 points.

The balance of opinion was also positive on expectations for sales increases going forward and on a topic the central bank considers critical — expectations for spending on machinery and equipment.

“Following a period of low investment, a number of manufacturers indicated that they are planning to increase spending on M&E in an effort to improve competitiveness or to create opportunities for growth,” the bank noted.

The balance of opinion on hiring was also solidly in the black, with 53 per cent saying they expected to add employees as opposed to only eight per cent who expected staffing levels to drop off. The 45-point balance of opinion for the positive was the highest in almost two years.

“Firms planning to increase employment cite a somewhat improved sales outlook or hiring associated with their initiatives to drive growth,” the bank said.

If borne out by reality, this would be welcome news to Canadian workers who have experienced at best a tepid labour market in the past year or so.

Despite a pickup in production capacity pressures, somewhat surprisingly firms also reported lower levels of labour shortages or skills mismatches, backing up a recent Parliamentary Budget Officer report on the controversial subject. The bank said shortages were restricted to hiring for specific positions, skill sets or regions.

In other results, firms still expect inflation pressures to remain soft and say borrowing conditions continue to improve.

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