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Bank of Canada sees business prospects improving

Bank of Canada sees business prospects improving

TORONTO — The Bank of Canada’s Winter Business Outlook Survey (BOS) showed improvement along a number of fronts that was attributed to “building domestic demand, a supportive export outlook and an expected recovery in energy-related activity,” RBC Economics reported today.

The outcome of the U.S. November elections was cited as a factor contributing to a more optimistic outlook for the United States though the overall response was tempered by those concerned about increased protectionism, said Paul Ferley, assistant chief economist.

The diffusion measure for future demand 12 months out jumped to 26 from 12 in the third quarter. This improvement occurred despite a flat past sales measure of 0.0 that followed of reading of only 1.0 in the third quarter, Ferley explained.

The measure for machinery and equipment investment jumped to 24 from 18 between the two quarters. Strength was evident among all regions and all sectors though particularly evident among exporters.

“It was of note that commodity-based sectors were seeing the need to increase capital spending after two years of sharp cutbacks. The employment measure similarly jumped higher to 37 in Q4 from 31 in Q3 reflecting broad-based gains,” said Ferley. “The report also indicated that the various inflation measures rose, but remained contained.”

Credit conditions were little changed in the quarter both from the borrower’s perspective, according to the BOS, and from a lender’s perspective, according to the separately released the Senior Loan Officer Survey.

“The BOS survey results indicate further improvement in business conditions,” said Ferley. “This is generally consistent with  indications that commodity prices have started to trend marginally higher after stabilizing through the last survey period in the autumn.

“The plummet in oil prices starting late 2014 had been a factor weighing on business conditions in earlier quarters. Sentiment may also have been buoyed at the end of last year by optimism about a strengthening U.S. economy in the wake of an expected fiscal policy boost from the incoming Trump administration,” he added.

“Looking further ahead, our forecast that oil prices will strengthen further to $56 per barrel and $63 per barrel this year and next, respectively, should provide further underlying support to sentiment,” he added. “However, this optimism could be tempered if signs emerge that increased trade protectionism is emerging from the Trump administration limiting Canadian exporters ability to benefit from the U.S. fiscal stimulus.”

SOURCE: RBC Economics press release

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About Greg Gerber

Greg Gerber is a freelance writer and podcaster who has been writing about the RV industry since 2000. He is the former editor of RV Daily Report and can be reached at greg@rvdailyreport.com.

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