Canadian businesses are anticipating only a minimal acceleration in sales growth over the next 12 months amid bleak expectations among firms linked to the energy industry, a new Bank of Canada poll suggests.
The central bank’s latest business outlook survey released Monday said that companies hit hard by the oil price slump reported that indicators of future sales, such as new orders, had seen scant improvement compared to a year ago.
“The moderation in future sales expectations was concentrated among firms in the Prairies, which see few signs of a recovery from the oil price shock,” the bank’s quarterly survey said.
In other regions of the country, the poll said “steady, albeit modest, domestic momentum” supported brighter sales outlooks.
The survey found that businesses outside the affected commodity industries and in the service sectors were more optimistic about the coming year. Rising demand from the United States and the past depreciation of the Canadian dollar remained key sources of stronger sales expectations, the poll said.
The survey also suggested that overall, firms generally expected to add jobs over the coming year — but found hiring intentions remained below post-recession levels and diverged considerably by sector.
Plans to reduce staff were prominent among companies in the goods sector, while firms in the service industries intended to boost their workforces to meet growing demand, the poll found.
“Hiring intentions remain modest overall,” the bank said.
Firms also remained cautious about business investment, with many companies tied to the energy sector budgeting for further cuts, the survey said. However, businesses in the service sectors were found to be more willing to invest and expand, it added.
CIBC chief economist Avery Shenfeld said the survey indicates that the repercussions from the fall in energy prices will continue to be felt.
“We’re not out of the woods yet,” Shenfeld said in a note to clients. “The energy shock dented Canada over the past 12 months, but the Bank of Canada’s latest survey suggests that the tide isn’t yet turning back in our favour.”
The Bank of Canada’s survey of senior managers from about 100 companies was conducted between May 9 and June 8, and therefore doesn’t reflect any potential changes in expectations linked to the United Kingdom’s referendum to leave the European Union.
National Bank senior economist Krishen Rangasamy said that companies’ actual investment and hiring may end up being softer following the result of the so-called Brexit vote than the opinions reported in Monday’s survey.
“Intentions to hire and invest remain weak, which does not bode well for economic growth in the second half of the year,” Rangasamy wrote in a research note.