Bank of Canada's latest quarterly Business Outlook Survey, conducted February 17 to March 12, was broadly weaker again --- the oil price slide impact is a little bit louder and a little bit worse. The survey also highlights the deepening shift in growth (such as it is) away from Western Canada toward manufacturing and exports in Central Canada.
Capacity pressures were little changed to slightly tighter, despite sluggish sales, highlighting the lack of spare capacity in the broader economy. The net percent of firms reporting they would have difficulty meeting an unexpected increase in demand nudged up two ticks to 43%. Reports of labour shortages dipped a tick to 21% of firms, far below the historical average of 35%, and many firms are reporting that shortages are much less intense than a year ago. There's nothing here to change the Bank of Canada's view that significant slack remains in the economy, and specifically the labour market.
"The BOS was again more cautious across the board, as the halving of energy prices continues to weigh heavily on the Canadian outlook for sales, capital spending and hiring. The results are consistent with our call for almost no growth in Q1 and just modesty better activity in Q2 (1.5% GDP) --- with today's survey results even casting some doubt on whether we will see even that modest improvement in Q2.
We don't believe this sluggish result raised the odds of a follow-up rate cut by the Bank; while we don't dismiss the chances of such, it will take some significant new disappointment to advance the cause." - says BMO Capital Markets
