There was one more sign yesterday that Canadian firms are gearing up for expansion, this time from the small-business sector.
The Business Barometer, a cross-country survey of managers by the Canadian Federation of Independent Business, shows optimism in February remaining high for the third month in a row as smaller firms regain confidence after the battering of the recession.
In Quebec, where business sentiment had lagged during much of the recovery, it seems that spirits have rebounded fully, with a reading that moved slightly above the national average and was stronger than for any other province in eastern Canada.
Overall, the picture was of balanced, upbeat sentiment in the small-business community right across most of the country, said Ted Mallett, chief economist at the CFIB.
The strongest readings were in Western Canada, but the rest of the country was also robust, with the exception of New Brunswick and Nova Scotia, which lagged significantly. Within the survey, a number of responses suggested that there could be staying power in the surprisingly rapid economic growth shown in Canada's GDP report for the final months of 2010.
The Business Barometer is a diffusion index, meaning that it's designed to show economic growth when it's above 50. Mallett said it suggests robust growth when it's around 70. Yesterday's report showed a reading of 69.4, a level that hasn't varied much in the past three months.
Encouraging signs of future growth peppered the results, with a reading of business managers who see improved performance over the next few months climbing for the second month in a row.
A question on employment intentions was the strongest in two years, Mallett said, while the reading on capital spending intentions showed only a small weakening in February after rising powerfully for most of the past year.
As well, there's evidence that the high value of the Canadian dollar isn't showing much sign yet of squelching sales by manufacturers, many of whom depend heavily on the U.S. market.
Indeed, manufacturers in the survey showed a slightly higher level of optimism than other firms, noted Stéfane Marion, chief economist at the National Bank.
That's a very strong sign that the factory sector isn't under stress, since the average of business sentiment in the survey has climbed all the way back to its pre-recession level, far above the level shown by an equivalent U.S. small-business survey.
While there were widespread fears that a high dollar would dampen any recovery by Canadian manufacturers, Marion had been skeptical, pointing to a KPMG analysis suggesting that Canadian factories were competitive with those in other leading industrial nations even with our currency at parity with the U.S.
As well, he said yesterday, a vigorous recovery in demand by U.S. consumers has helped overcome the drag of a strong currency, driving a surge in export sales that showed up in Canada's fourth-quarter economic-output figures.
That seemed to be confirmed by an investment question on the CFIB survey. Overall investment intentions have been trending upward, and the trend seems to be still stronger among manufacturers.
We'll have to wait another week or so for the next major economic indicator -- job creation for the month of February -- to provide another sign whether our economy really is kicking it up a notch.
But so far, the portents are good.
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