Business Sentiment Nears Record Level On Improving Outlook

Business sentiment in Canada is marching higher.

According to the Bank of Canada, business sentiment rose to near record levels at the start of this year on an improving outlook for domestic and foreign demand.

The central bank’s composite gauge of sentiment rose to 2.9 in the first quarter, the highest level since 2018 and the third highest score on record. That’s up from 1.3 in the fourth quarter of 2020 and a decade-low of -6.9 at the height of the pandemic last year.

The results of the latest quarterly survey of executives shows that business conditions continue to improve, with many firms no longer worried about pandemic uncertainty. Managers reported stronger sales outlooks, investment intentions and accelerating inflation expectations.

Highlights from the survey include that nearly two-thirds of firms indicate sales have reached or exceeded pre-pandemic levels; 60% of firms reported improving indicators of future sales; investment intentions are at record highs with 59% of managers saying they plan higher spending on machinery and equipment over the next 12 months; and more than half of firms see inflation moving above 2%.

The Bank of Canada’s business outlook survey was conducted from mid-February to early March. The results will fuel expectations that the Bank of Canada will start tightening its monetary policy stance as early as its April 21 policy meeting.