Canadian businesses are more optimistic about their future sales and employment levels over the next 12 months, while fewer of them are reporting tighter credit conditions than in the spring, according to two surveys released by the Bank of Canada.
The central bank's closely watched Business Outlook and Senior Loan Officer surveys, released today, provide the latest glimmers of hope that Canada has likely turned a corner on both the credit crunch and recession.
The Business Outlook survey is based on interviews with senior management at about 100 companies. Its findings suggest that about 61 per cent of companies expect their sales volume to increase at a greater rate over the next year. That number stood at just 30 per cent in April.
There was also a marked decrease in the number of firms expecting sales to fall. This time around, some 23 per cent of those surveyed expressed such concerns. About 52 per cent took that view back in the spring.
While businesses remain notably wary about investing in new machinery and equipment, about 39 per cent of those surveyed suggested their payrolls would increase over the coming year, while 17 per cent thought employment levels would be lower. In April, 25 per cent of surveyed companies were optimistic about hiring, while 26 per cent anticipated workforce cuts.
"Hiring intentions have improved in all sectors but continue to be relatively weak in some regions, notably, in Ontario," the Bank of Canada said in its report.
The central bank also found that fewer companies are reporting a "tightening in the terms and conditions" for obtaining credit than earlier this year.
About 33 per cent suggested that credit conditions had "tightened" over the past three months versus the 21 per cent that reported conditions had "eased." In April, those figures stood at 44 per cent and 8 per cent, respectively.
Moreover, the bank's Senior Loan Officer Survey found that tightening credit conditions was more focused in hard-hit sectors such as autos, forestry products and transportation. Previous surveys had indicated the problem was more generalized.
"The two Bank of Canada surveys indicate that the credit tightening continues to ease from both a lender's and borrower's perspective. However, a majority of respondents from both perspectives indicate that credit has gotten tighter," said Paul Ferley, assistant chief economist at Royal Bank of Canada, in a note to clients.
"This continuing downside risk to growth that this presents will likely result in interest rates being maintained at current very stimulative levels through the middle of next year though with little prospect of the Bank of Canada widening its range of stimulative measures to include quantitative easing."
The Conference Board of Canada, meanwhile, issued a separate report predicting the national economy would return to "tepid" growth during the second half of 2009. Its forecast sees Canada's real gross domestic product sinking by 1.9 per cent in 2009, but rebounding to 2.7 per cent growth next year.
The research organization, however, is maintaining a cautionary stance on its projected growth for 2010, noting the anticipated 2.7 per cent economic expansion is "still much weaker than typical post-recession growth." Moreover, the pace of recovery is expected to be slow as Canada tries to shake the economic hangover caused by the larger global recession.
"The current recession is so widespread that its effects are expected to linger for longer than the typical business cycle," said Pedro Antunes, director of national and provincial forecast, in a release.
"Although the U.S. economy is forecast to return to growth in the second half of this year, battered American consumers will be saving more of their incomes in the foreseeable future. As a result, the global recovery will be soft, and Canada is not expected to achieve economic growth significantly above its potential until at least 2011."
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14.07.2009 02:29
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