Business sentiment is at its worst level in 12 years while the country's credit conditions are at their tightest in a decade, according to two surveys released by the Bank of Canada Monday.

The country's central bank said Canada's businesses expect to sell fewer products, invest less money and have smaller payrolls in the upcoming months, thanks to the ongoing global financial and economic crisis.

The findings were contained in the bank's winter outlook survey in which the central bank's regional offices talk to executives from 100 firms.

"Almost all indicators are at their lowest level since the survey began in 1997," said the bank.

The survey asks businesses about condition in a number of different areas including:

  • Sales.
  • Investment.
  • Employment.
  • Credit conditions.
  • Production capacity.

In most cases, companies have become more pessimistic regarding their business prospects since the summer.

In the latest questionnaire, for example, 57 per cent of respondents thought their sales growth would slow compared to 34 per cent who believed in a looming reduction in the autumn survey.

Business conditions in next 12 months Better (%) Worse
Sales 23 57
Employment 20 28
Investment 17 48
Source: Bank of Canada

The percentage of executives who thought they would spend less on machinery and equipment over the next 12 months jumped to 48 per cent, up from 18 per cent in the previous survey.

Tough borrowing times

If one thought that the deteriorating business conditions would lead to an ease of credit in the Canadian economy, however, another Bank of Canada survey — this time of senior credit officers — showed national credit conditions at their tightest since 1999, when the survey began.

In this study, a positive number implies financial institutions are restricting lending while a negative figure shows a credit easing.

The Canadian survey, which covered 60 per cent of business lending, posted a reading of 75.8 for the last three months of 2008 versus a similar pulse-taking in the third quarter of the same year of 49.7.

These results were confirmed by the Bank of Canada's business conditions survey in which 63 per cent of executives said they were experiencing a harder time securing credit in the latest part of 2008 compared to 44 per cent in the fall.