Skip to main content
The Globe and Mail
Support Quality Journalism.
The Globe and Mail
First Access to Latest
Investment News
Collection of curated
e-books and guides
Inform your decisions via
Globe Investor Tools
per week
for first 24 weeks

Enjoy unlimited digital access
Enjoy Unlimited Digital Access
Get full access to
Just $1.99 per week for the first 24 weeks
Just $1.99 per week for the first 24 weeks
var select={root:".js-sub-pencil",control:".js-sub-pencil-control",open:"o-sub-pencil--open",closed:"o-sub-pencil--closed"},dom={},allowExpand=!0;function pencilInit(o){var e=arguments.length>1&&void 0!==arguments[1]&&arguments[1];select.root=o,dom.root=document.querySelector(select.root),dom.root&&(dom.control=document.querySelector(select.control),dom.control.addEventListener("click",onToggleClicked),setPanelState(e),window.addEventListener("scroll",onWindowScroll),dom.root.removeAttribute("hidden"))}function isPanelOpen(){return dom.root.classList.contains(}function setPanelState(o){dom.root.classList[o?"add":"remove"](,dom.root.classList[o?"remove":"add"](select.closed),dom.control.setAttribute("aria-expanded",o)}function onToggleClicked(){var l=!isPanelOpen();setPanelState(l)}function onWindowScroll(){window.requestAnimationFrame(function() {var l=isPanelOpen(),n=0===(document.body.scrollTop||document.documentElement.scrollTop);n||l||!allowExpand?n&&l&&(allowExpand=!0,setPanelState(!1)):(allowExpand=!1,setPanelState(!0))});}pencilInit(".js-sub-pencil",!1); // via darwin-bg var slideIndex = 0; carousel(); function carousel() { var i; var x = document.getElementsByClassName("subs_valueprop"); for (i = 0; i < x.length; i++) { x[i].style.display = "none"; } slideIndex++; if (slideIndex> x.length) { slideIndex = 1; } x[slideIndex - 1].style.display = "block"; setTimeout(carousel, 2500); } //

The Bank of Canada’s latest survey of companies shows that sentiment was improving heading into the latest round of lockdowns, with most businesses reporting stronger investment and hiring plans.

The quarterly Business Outlook Survey (BOS) was conducted from mid-November to early December, as the number of COVID-19 cases was rising, but before the reimposition of strict lockdown measures in several provinces over the holidays.

“Robust foreign demand, improved confidence related to vaccines and ongoing government relief programs all contribute to the improved outlook,” the bank said.

Story continues below advertisement

The economic recovery remains uneven, with businesses in “high-contact” industries such as hospitality and tourism reporting a less optimistic outlook. While most companies expect their sales to increase this year compared with the previous 12 months, a third do not expect their sales to return to prepandemic levels over the next year.

The central bank’s gauge of consumer sentiment, also published Monday, was less upbeat, with optimism around vaccine approval being balanced against a surge in COVID-19 infections across the country.

In the BOS, investment and hiring plans improved across all regions, with many companies reporting plans to invest in productivity-enhancing automation and digitalization.

“Among firms with positive hiring plans, about half expect to ramp up the size of their workforce later in 2021, when they believe the pandemic will be largely under control,” the bank said.

“Still, results point to the uneven and lengthy recovery of labour markets, as one-quarter of firms expect the size of their workforce to remain below pre-pandemic levels for at least another year,” it added.

With demand returning, companies in goods-producing sectors are starting to report supply constraints and an increase in input prices. This could factor into the central bank’s rate decision next week, as the survey signals that there were inflationary pressures before the second wave of lockdowns.

“Many goods-producing firms reported experiencing long wait times sourcing materials – for example, from the United States or Asia,” the bank said. Companies also cited increasing shipping fees, commodity prices and subcontracting fees.

Story continues below advertisement

Over all, the majority of businesses expect inflation to remain low over the next two years, with 60 per cent of respondents expecting a rate of between 1 per cent and 2 per cent.

The latest lockdown measures have led some economists to speculate in recent weeks that the bank could trim its key overnight rate on Jan. 20 with a so-called “micro cut.” The optimistic tone of the BOS, however, suggests policy changes are unlikely, wrote Andrew Kelvin, the chief Canada strategist at TD Securities, in a note to clients.

“Even if the bank decides that the BOS and [the consumer survey] are not timely enough to be useful, at the very least it would be difficult to draw a negative conclusion from either survey, as the slower recovery in the services sector is a well-worn narrative at this point,” he wrote.

In the consumer survey, labour-market expectations remained below prepandemic levels. People were slightly more optimistic about keeping their jobs, but prospects for finding a new job deteriorated. The reported likelihood of voluntarily leaving a position also decreased slightly, suggesting that workers are unwilling to change jobs while the uncertainty around the pandemic persists.

“If these concerns result in less turnover in the job market, that could lower the quality of job-worker matching, leading to lower productivity and weaker wage growth in the future,” the central bank said.

Consumers did indicate that their spending would likely increase, perhaps in response to optimism around vaccine development, even as expectations for income growth remained unchanged.

Story continues below advertisement

Short-term consumer expectations for inflation ticked up in the quarter, which may reflect an increase in gasoline prices, the bank said. Expectations for inflation over the next two years remained stable, while five-year expectations declined.

“The erosion of longer-term inflation expectations in the consumer survey might provide central bankers with a bit more cause for concern. But generally, the surveys taken on their own don’t point to any need by the Bank of Canada to take immediate action,” CIBC Capital Markets economist Royce Mendes wrote in a note to clients.

Your time is valuable. Have the Top Business Headlines newsletter conveniently delivered to your inbox in the morning or evening. Sign up today.

Your Globe

Build your personal news feed

  1. Follow topics and authors relevant to your reading interests.
  2. Check your Following feed daily, and never miss an article. Access your Following feed from your account menu at the top right corner of every page.

Follow the author of this article:

Follow topics related to this article:

View more suggestions in Following Read more about following topics and authors
Report an error Editorial code of conduct
Due to technical reasons, we have temporarily removed commenting from our articles. We hope to have this fixed soon. Thank you for your patience. If you are looking to give feedback on our new site, please send it along to If you want to write a letter to the editor, please forward to

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff.

We aim to create a safe and valuable space for discussion and debate. That means:

  • Treat others as you wish to be treated
  • Criticize ideas, not people
  • Stay on topic
  • Avoid the use of toxic and offensive language
  • Flag bad behaviour

If you do not see your comment posted immediately, it is being reviewed by the moderation team and may appear shortly, generally within an hour.

We aim to have all comments reviewed in a timely manner.

Comments that violate our community guidelines will not be posted.

UPDATED: Read our community guidelines here

Discussion loading ...

To view this site properly, enable cookies in your browser. Read our privacy policy to learn more.
How to enable cookies