Canadian Business Outlook Falters

Optimism for Canadians businesses concerning future sales, and overall investment, has weakened during the spring, diminishing prospects of a business-led boost for the Canadian economy.

The closely watched Bank of Canada survey found that given the level of market uncertainty during the survey period, firms “do not foresee a marked change in the pace of their sales growth over the next 12 months,” and are strategizing a “targeted approach to increases in investment over the near term.” Although expectations of future employment levels rose slightly, this correlates to most firms plans to use conservative hiring to meet any potential extra operational needs.

David Madani, economist at the research firm Capital Economics, noted to clients that the “[s]oftening business sentiment supports our view that Canada’s economy will underperform its potential 2 per cent growth pace over the second half of this year.”

The Canadian dollar also fell to an almost two-year low as concerns continue to mount regarding imbalanced growth and capital allocation, commodity prices under increasing pressure, and a general sense of global market uncertainty and volatility.

In my opinion, the Bank of Canada survey is exceptionally important as it provides a glimpse into the market outlook and investment mindset of businesses for the coming 12-months. After the main recession period from 2008 to 2009, much of the recovery was driven by government and consumer spending, while business investment was restricted due to the volatility in the United States and Europe. Now, with interest rates and bond yields increasing, and the phasing out of quantitative easing, consumers will not be borrowing and spending the roughly $50 billion per annum they have been, leaving a gaping hole in the economy. As I had mentioned in a previous article, this meant that businesses would be forced to pick up the slack by investing and increasing exports or the Canadian economy will suffer. That being said, it is also important to note that the survey was conducted from May 21st to June 13th, 2013 – a period of marked economic uncertainty. The fact is that most domestic businesses are waiting to see what improvements are made in the United States and global economies prior to investing, but it may be a situation where mass inaction will be fiscally detrimental in the near-term and not just over a protracted period.

Regardless, if you’re thinking about making a switch, purchasing a home, or refinancing your mortgage, contact your REALTOR® & Mortgage Broker, or feel free to give us a shout, and We’ll be happy to chat.

Best Regards,

Goetz Kopf
REALTOR® and Senior Private Loan Specialist - Residential & Commercial
Century 21 Desert Hills Realty and EQ Lending Corp.


Daman Lehal
Broker/Owner of EQ Lending Corp.


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