Canadian companies are reporting improved sales and more than half believe they may soon hire new workers, a spring survey of business sentiment by the Bank of Canada shows.
The generally positive outlook from the survey of 100 Canadian firms in March marks an improvement from the last quarterly survey, which showed they still considered their outlook to be uncertain.
"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.
About 44 per cent of firms reported sales growth in the past year and 51 per cent foresee improved sales for the coming year, with exporting companies generally optimistic.
Exporters see better days ahead
“Export-oriented firms generally expect sales to gradually strengthen, while those with a more domestic focus often cited efforts to enter new markets or develop new products following weak past sales,” the bank said.
More firms are reporting they are close to capacity, with 53 per cent saying they may have to hire new workers in the coming year. That may be good news for Canadian job-seekers, who have faced a generally lacklustre job market.
In the important measure of intentions to invest in new machinery and equipment, the balance of opinion on investment t remains positive, but little changed from the winter, with 46 per cent saying they planned to spend more this year than last year.
The Bank of Canada points to the intensely competitive environment many businesses face and rising input costs from the lower Canadian dollar as potential red flags amid the general optimism.
Bank of Canada governor Stephen Poloz has said he relies on anecdotal evidence and surveys such as the bank’s quarterly business sentiment outlook to guide his decisions on interest rates.
Economists cautiously optimistic
The results of this survey is in line with the opinions of other economists who are cautiously optimistic about recovery for the Canadian economy.
“Today's report is indicative of the mounting optimism that has been building gradually in the Canadian economy over the past year,” TD economist Connor McDonald said in a note to investors.
“The increasing optimism of Canadian businesses is a good sign of where the Canadian economy will be heading over the next year. A stronger economic outlook for the U.S. and a weaker loonie will continue to support future sales and help to drive modest Canadian growth. All-in-all, we expect Canadian real GDP growth to improve to 2.3 per cent over 2014,” he wrote.
However, any change in interest rates is not expected “until the end of the latter half of 2015,” he said.