Canada’s corporate leaders turn gloomy amid global uncertainty

OTTAWA — Canadian corporate leaders are pulling back on their business plans because of weak global economic growth and uncertain demand, according to a Bank of Canada survey.

In its autumn Business Outlook Survey, the central bank said Monday that companies “have tempered their expectations for business activity.”

“Firms are generally more circumspect about near-term investment decisions and are focusing on minimizing costs,” the bank said, adding that companies expect little change in the pace of sales growth over the next 12 months.

“The balance of opinion on investment remains positive but has declined, as many firms report shifting their focus toward more intensive use of existing capital over the near term.”

Hiring plans are “also less widespread” than indicated in the bank’s previous survey.

Monday’s results are based on interviews of senior managers at about 100 Canadian companies between Aug. 27 and Sept. 20.

The survey found 40% of businesses said the pace of sales growth increased over the past 12 months,while 34% said growth had slowed. The other respondents saw no change. In the bank’s July survey, 53% said sales growth had increased over a 12-month period.

Over the next 12 months, most businesses are evenly split at 35% between faster and slower sales growth expectations. The previous survey showed 47% expected sales to grow.

“Amid further indications that the global economic outlook will remain subdued, the moderation in future sales expectations was concentrated among firms most exposed to global demand, particularly those in the manufacturing sector,” the bank said Monday.

“Commodity demand and steady, albeit modest, domestic momentum are still among the main factors generally providing positive support for firms’ sales outlooks.”

As for investment, 37% of companies said they plan to increase spending over the next 12 months, compared with 29% that said investments would be lower. The previous survey showed 43% had planned to make investments.

Monday’s survey showed 44% of companies plan to increase employment levels over the same period — compared to 59% in July — while 18% said those levels would decline.

“A number of firms cited productivity gains from recent capital projects, efforts to reduce costs or demand conditions as factors influencing their hiring decisions,” the bank said.

Pressures on productivity capacity was mainly unchanged in the autumn survey, while companies expect input prices to rise at the same pace over the next 12 month and output prices to accelerate, indicating “a desire to improve profit margins.”

Leslie Preston, an economist at TD Economics, said “looking ahead to 2013, uncertainty about the U.S. fiscal situation should start to clear up, and demand for Canadian exports is also expected to improve.”

“That should help lift the mood of businesses, helping investment growth and brightening the outlook for the Canadian economy, particularly in the second half of next year.”

Meanwhile, the Bank of Canada’s quarterly Senior Loan Office Survey showed lending conditions will likely continue to ease in the third quarter of 2012.

Original Article
Source: ottawa citizen
Author: Gordon Isfeld