Canadian business sentiment drops from high levels: central bank survey

money

Canadian business sentiment has fallen from elevated levels as companies point to uncertainty around global trade, the housing sector and the energy industry, according to a new Bank of Canada survey.

The central bank's measure for business sentiment dropped from its near-record heights last year into negative territory for the first time since the third quarter of 2016.

"The business outlook survey indicator declined from a strongly positive level in the winter survey and is now slightly negative, suggesting a softening in business sentiment," said the Bank of Canada's analysis of the results, released Monday.

"Responses to several (business outlook survey) questions moved below their historical averages."

The previous survey of around 100 senior managers delivered a more-upbeat reading based on a November poll taken as oil prices started to decline. The survey released Monday was conducted between late February and early March.

The latest report comes after Canada saw an abrupt economic deceleration in the final three months of 2018 as oil prices tumbled.

Bank of Canada governor Stephen Poloz has said the economy needs a longer stimulative boost from low interest rates to help it overcome domestic and global challenges. Poloz has predicted the country's recent economic weakness to only be temporary.

The survey's findings suggest companies' expectations for sales remained positive, though they were softer than a few months earlier due to less optimism about future demand.

The Bank of Canada said the results "point to a moderation from previously high levels of domestic and foreign demand for firms in most regions."

The pace of sales growth has "moderated slightly" over the previous 12 months following a solid year, the bank said. It said the moderation reflected decelerating demand for companies in the housing and energy sectors.

Looking ahead, firms were more upbeat, saying they expected the rate of sales to be "marginally faster" over the coming year. The rosier outlook was widespread among companies in the services sector, especially those in central Canada who were in information technology and transportation.

Outside of the energy-dependent Prairies, investment and hiring intentions remained resilient, particularly in the services sector.

The survey also suggested previous concerns about labour shortages had eased, although firms still said it was more challenging to find workers than it was 12 months earlier.