The Bank of Canada says business sentiment in Canada remains at historic lows as uncertainty around Covid-19 and a potential vaccine reduce demand and sales prospects.
The results from the central bank’s autumn Business Outlook Survey show business conditions improved somewhat during the summer as warmer weather and lower Covid-19 case counts encouraged consumers to go out and buy goods and services. However, businesses are still worried about future demand and sales prospects with some economic restrictions still in place.
"Firms reported their sales prospects are limited by weak demand and precautionary health guidelines, and that their investment and hiring plans remain modest due to elevated uncertainty," the Bank of Canada said in the survey, which took place between August 24 and September 16.
The tone of the survey is consistent with the Bank of Canada’s previously stated view that a full recovery will be long and difficult. The economy rebounded more quickly than expected in the summer as containment measures were lifted but the second phase of the recovery -- known as the "recuperation" phase – is expected to be uneven and protracted.
The composite gauge of sentiment rose to -2.2 in the third quarter from a decade-low of -6.9 in the second quarter. And although the survey was completed recently, economic conditions have changed as Covid-19 cases continue to rise, particularly in the country’s two largest provinces. Ontario and Quebec.
Highlights from the report include:
One third of firms reported sales were mostly unaffected or positively affected by COVID-19; a second third of firms indicated sales have already fully recovered or will recover within the next 12 months; and another third either expect their sales won’t return for at least 12 months or are unsure when sales will fully rebound.
Businesses that say sales won’t recover within a year are typically linked to tourism and related industries where physical distancing is difficult.
Businesses linked to real estate, infrastructure and natural resources have largely recovered or see themselves recovering within a year.
Wage growth is expected to slow, the survey found.
Firms expect input prices to grow at a slightly faster pace over the next 12 months, driven by increases in commodity prices, difficulty sourcing inputs, or higher operating costs due to health guidelines.
Businesses have slightly higher inflation expectations, with 11% of firms expecting inflation above 3%.
