–Firms See Little Change In Pace Of Growth In Next Year
–Firms Still Plan To Increase Biz Investment And Employment

By Courtney Tower

OTTAWA (MNI) – Canadian businesses still plan to increase their
productivity investments and to hire more employees, but at a slower
pace because they expect little sales growth in the next year.

The Bank of Canada, in its autumn survey of firms large,
medium-sized and small, said Monday that optimism has dropped from its
summer set of interviews with senior managers. The interviews were
conducted from August 22 to September 22.

Businesses are coming off, overall, 12 months of “robust sales
activity” driven by firms in commodities-rich Western Canada and firms
elsewhere tied to commodities, with 53% saying their sales volumes
increased over the last 12 months at a greater rate than in the 12
months before that.

But then, for the future sales outlook, there is an overall
expectation of little change in the pace of growth over the next 12
months. There is a slightly positive balance of opinion, 39% saying they
expect sales to grow over the next year, while 33% expect growth to be
less and 28% expect sales volumes to be about the same.

The reasons given are the obvious, “weaker expectations for U.S.
growth and a more uncertain global outlook.”

“The balance of opinion on investment in machinery and equipment
remains solidly positive, although it has moderated since the summer
survey,” the Bank reports. It says 41% of firms plan to increase such
investment, while 19% expect to decrease it and 40% expect their
investment spending to stay the same.

However, a great element of caution is introduced. “Overall, more
firms cited plans to repair or replace existing equipment than in the
summer survey,” the report says.

A strong 52% of firms surveyed report intentions to hire more
employees over the next year, against 14% that expect to reduce levels
of employment — but that is a decline from the record high seen in the
summer survey. Plans to increase employment “continue to be widespread
across regions and most sectors,” the BOC says.

Overall, firms expect increases in their input costs to stabilize
over the next year, while the prices they can charge are expected to
rise at a slower pace than expected in the summer survey. The lower
outlook for output prices was driven mainly by lower expectations among
firms in Central and Eastern Canada, who cite weaker demand or intense
competition as key factors. Commodity producers expect slower increases
in their output prices.

Inflation expectations have declined, with the great majority (88%)
expecting total Consumer Price Index inflation to be within the Bank of
Canada’s inflation control range of 1%-3%. The report says 41% expect
inflation at 1%-2%, and 47% at 2%-3%.

Over the past three months, 65% of those interviewed said terms and
conditions for obtaining financing had not changed from the previous
three months. Conditions had eased for 24% and tightened for 11%.

A separate survey by the Bank, of senior loan officers in major
Canadian financial institutions, also released Monday, says there had
been an overall easing in business-lending conditions during the third
quarter of this year, on both prices and terms and conditions. There is
no information in this report on the actual size of the change. “Eased
lending conditions were reported across all borrower categories,” the
report said.

** Market News International Ottawa **

[TOPICS: M$C$$$,MAUDS$]