OTTAWA — Business confidence in Canada has edged higher as global trade tensions have eased, but the Prairies, hard hit by a drop in energy prices, continue to remain a weak spot, according to the latest outlook survey by the Bank of Canada.
The central bank said Monday that its Business Outlook Survey, which is based on interviews with senior management at about 100 firms, found that outside of the energy-producing regions of the country, reports of improved indicators of future sales are widespread.
It said foreign demand, particularly from the U.S., continued to lift exports as businesses reported improved orders from foreign customers compared with a year ago.
“In addition, with concerns around trade tensions declining somewhat, firms’ expectations for U.S. economy growth have recovered slightly,” the bank said in its report.
“Many firms expect to benefit directly from U.S. demand, notably in construction and tourism industries. However, some reported dampened prospects due to protectionism and other U.S. policies that are more favourable to their U.S. competitors.”
The bank’s survey also suggested that labour shortages are a key obstacle to meeting an unexpected rise in demand except in the Prairies.
“Businesses in the Prairies continued to report limited capacity pressures, often citing weak demand and readily available labour,” the report said.
The survey suggested the balance of opinion among businesses on investment in machinery and equipment edged lower, but still suggested companies plan to increase their capital spending in the next 12 months.
“Many firms reported focusing their investments on efforts to increase efficiency, frequently including investments in technology,” the report said. “Intentions to increase investment spending are less widespread than in the previous survey, as more firms than usual reporting having just completed large investment projects last year.”
TD Bank senior economist Brian DePratto called it “another ho-hum report.”
“Canadian firms remain cautiously optimistic, with solid hiring intentions offsetting a relatively lacklustre investment outlook,” DePratto wrote in commentary.
“It bears noting again that the regional element in this survey is important, with a still challenging operating environment for firms in the Prairies hidden beneath the headline figures.”
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