BoC’s business outlook survey shows further rebound in confidence among Canadian firms

The Bank of Canada’s quarterly Business Outlook Survey (BOS) showed a further widespread rebound in confidence amongst Canadian companies. Expectations about future sales and employment rose driving the rebound in the headline print. The sales components of the report improved generally. The measure of past sales growth rose after a series of flat readings, while the balance of opinion about future sales reached its highest level in at least two years.

The indicator of future sales, that summarize the state of order books, sales inquiries and other indicators, continued to rise and is now within a hair of its previous high. In both cases, a positive outlook for domestic sales is reported to be broad based throughout provinces and regions. It was indicated that activity is likely to stay high in the housing sector.

The balance of opinion on investment pulled back a bit but continues to be firmly in positive territory, with the anecdotal evidence given the report implying that intentions have started to shift toward expanding capacity, stated TD Economics in a research report.

On the employment side, the report came in strong as the balance of opinion on future employment levels reached the highest level on record. Matching this, both the indicator of labor shortages, and the intensity of those shortage rose with a marked rise reported for the latter.

Companies, on balance, anticipate a slight rise in input costs; however, they also expect output prices to rise. There was a different story about consumer price inflation. Around 6 percent of companies shifted their expectations lower from 2 percent to 3 percent inflation to 2 percent 2 percent range over the coming year. Out of all respondents, 70 percent expect price rises in the bottom half of the Bank of Canada’s control range.

Canada has had a series of solid economic releases lately and business confidence could again be added to the list. Positivity amongst Canadian companies rebounded and key forward-looking indicators, markedly the indicator of future sales, rebounded for a third consecutive quarter. It seems that Canada’s companies have fully shaken off the setbacks seen in recent years and are poised for a continued economic growth. Although the rate of growth is expected to slow down as the year progresses, the BOS underpins the view that still above-trend growth is in the offing for the rest of 2017, added TD Economics.

At 19:00 GMT the FxWirePro's Hourly Strength Index of US Dollar was bearish at -88.2978, while the FxWirePro's Hourly Strength Index of Canadian Dollar was highly bullish at 140.531. For more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex

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