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BoC: Canadian Business Outlook Turns Slightly Negative in 2012

  • By Andrew Deichler
  • Published: 2012-01-10

Canadian businesses’ attitudes about the economy are turning pessimistic in the New Year, according to a new study by the Bank of Canada.

The banks’ winter Business Outlook Survey, released Monday, revealed that Canadian firms—particularly those in Western Canada—expect sales growth to slow considerably in 2012. Overall sentiment has been deflated somewhat by weak economic growth in the United States, the eurozone debt crisis, and a projected slowdown of domestic household spending.

Out of 100 Canadian businesses surveyed, 37 percent see sales increasing at a greater rate than last year, while 41 percent see slower sales growth and 22 percent see it remaining unchanged. Conversely, 54 percent reported sales increasing at a greater rate over the past 12 months, with only 25 percent reporting a sales increase at a lesser rate and 21 percent seeing little to no change.

The respondents predicting stronger growth are those that have plans for new product development or are moving into new domestic and external markets. Overall, Canadian firms still expect to increase investment and grow their workforces, though they less robustly than before.

Input prices are expected to rise at the same rate as it has over the past 12 months, while output prices are projected to see slightly slower growth. This slightly negative outlook is attributed to businesses seeing weaker demand and competitive pressures.

Expectations for total CPI inflation over the next two years remain fundamentally unchanged, with businesses seeing the annual rate coming in at about one to three percent.

The balance of opinion on the terms and conditions for obtaining financing rose to just above zero. Firms are no longer reporting a net easing in credit conditions. The survey attributes this to credit conditions tightening over the past three months, due primarily to an increase in borrowing costs.


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