Weak demand, as well as uncertainty over future demand, are driving firms’ investment and capacity-planning decisions, according to the Bank of Canada’s (BOC) Fall Business Outlook Survey released October 11.
According to the survey, businesses had slow or negative sales growth over the past 12 months. However, firms expect gradually recovering U.S. demand will increase sales prospects, indicating that they feel more optimistic than they had in the summer regarding future sales.
In general, they believe sales growth will not deteriorate further over the next 12 months, but this improved optimism not yet led to plans to increase investment or employment.
Canadian businesses are relying on existing capacity to meet demand, and don’t plan on expanding capacity over the near term, as they are generally waiting for evidence of strengthening demand.
The survey found that inflation expectations remain within the BOC’s inflation-control range between 1-3%. Most firms expect inflation to remain in the bottom half of that range.
