Canadian businesses are more optimistic about hiring and investing than they have been in a couple of years, but are still struggling to gain traction in the aftermath of the resource slump, according to a closely watched Bank of Canada survey.
There are "some signs of improving business prospects," amid early signs that the resource slump is ending, the central bank said in its quarterly business outlook survey, released Friday.
"Firms believe that resource-related activity may be bottoming out following two years of hardships," according to the report, based on interviews with executives at 100 companies that broadly represent the makeup of Canada's business sector. "Both investment and employment intentions improved, with cuts tapering off in resource sectors."
The bank said many resource companies – particularly in oil, gas and mining – "sense" the long slump has hit bottom. The price of crude oil is now hovering around $50 (U.S.) a barrel, after sinking below $30 earlier this year.
Canada's economy added more than 67,000 jobs in September, with six out of 10 provinces showing gains, Statistics Canada reported Friday.
Nonetheless, the survey found that while more companies are having trouble finding workers, few are facing significant capacity or pricing pressures. And sales expectations remain subdued and heavily dependent on exports. The survey was conducted between Aug. 18 and Sept. 13.
"Even with the improvement, business optimism about the future remains below historic trends, likely reflecting the challenge of operating in a slow-growth environment," Toronto-Dominion Bank economist Brian DePratto said in a research note.
The business outlook survey is the last major piece of economic data that officials at the central bank look at before its next forecast and rate-setting announcement on Oct. 19. Few economists expect a change in the bank's key lending rate, which has been fixed at 0.5 per cent since July, 2015.
The survey suggests there is "little urgency for the Bank of Canada to ease further in the near term," said Bank of Montreal economist Benjamin Reitzes.
"The Bank of Canada is on hold, and there's nothing here to change that," he said.
The survey said 42 per cent of companies plan to boost spending on machinery and equipment over the next year, versus 24 per cent who expect to spend less. That's a substantial improvement over the previous survey, conducted in May and June, and the highest level of optimism in two years.
Companies in the Prairie provinces and in the resource sector reported they are "starting to see an end to cuts in investment budgets."
Investment in Canada's oil and gas sector has plunged 60 per cent since 2014.
Meanwhile, 47 per cent of respondents said they plan to boost employment over the next year – the highest level since the fourth quarter of 2014.
"Unlike the stark divergences evident in recent surveys, positive employment intentions are now more widespread across all regions and most sectors," the bank said. "Nonetheless, positive hiring expectations in the Prairies merely reflect the fact that fewer businesses expect further cuts."
About a quarter of respondents reported labour shortages, up from the previous survey but still low by historical standards.
The share of companies experiencing capacity pressures – 38 per cent – was up a bit from the previous survey.
On the inflation front, the balance of opinion is for slightly lower input and output prices. And a record share of businesses (76 per cent) said they expect inflation to be in the bottom half of the central bank's 1- to 3-per-cent target range over the next year.
A separate quarterly survey of loan officers, also released Friday by the central bank, found that overall business lending conditions were "largely unchanged."