Businesses remain as optimistic about the economic outlook as they were in the summer, according to the Bank of Canada’s autumn Business Outlook Survey released Friday.

Although they have marked down their growth forecast for the U.S. economy, Canadian businesses expect stronger domestic demand to pick up the slack.

Businesses remain generally optimistic about expected sales growth, the Bank reports. “Businesses in Western Canada expect strong domestic and foreign demand for a variety of products, including industrial commodities. Overall, businesses in Central and Eastern Canada expressed more concern about the negative implications of high oil prices and slower growth in the U.S. Economy,” it says.

Investment intentions for expenditures on machinery and equipment remain solid, the Bank notes. And, employment intentions remain positive, given continued pressures on production capacity and expected strong domestic demand, notably in the wholesale, retail, and other service sectors.

Capacity constraints were most often cited in the resource and construction sectors. Labour shortages have intensified since the summer survey, the Bank observed. They are most prevalent in Western Canada and are the main source of pressure on production capacity. Shortages were most often mentioned in the resource, construction, and wholesale and retail trade sectors.

On the inflation front, businesses also expect input prices to rise at about the same pace over the next 12 months as they did over the past 12 months. As in the summer survey, businesses appear to be more uncertain than usual about future movements in commodity prices.

Over the next 12 months, businesses expect output prices to rise at a faster rate than they did during the past 12 months. And, prospects of higher sales are encouraging some firms to attempt to pass through cost increases or to increase profit margins, the Bank says.

Inflation expectations had moderated slightly at the time of this survey, the Bank says. “The number of firms expecting inflation to be above the Bank’s inflation-control target range of 1% to 3% was down from the summer survey, reflecting businesses’ expectations of slower increases in the price of energy,” it reports.

The survey summarizes interviews conducted by the Bank’s regional offices with the senior management of about 100 firms, selected in accordance with the composition of Canada’s GDP.

The autumn survey was conducted from August 23 to September 14.