Newspaper article The Canadian Press

Canadian Firms Look to Better Sales, More Hiring, but Optimism Still Muted

Newspaper article The Canadian Press

Canadian Firms Look to Better Sales, More Hiring, but Optimism Still Muted

Article excerpt

After tough 2012, firms expect better results

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OTTAWA - After suffering through a rough 2012, Canadian companies are hopeful of a modest turnaround this year that will allow them to hire more workers and increase investment, a new Bank of Canada quarterly survey suggests.

However, the central bank's latest business outlook survey also notes that while businesses expect 2013 to be better, their optimism is far from exuberant.

Companies are reporting fewer capacity restraints in meeting unexpected production demands and fewer labour shortages than they did three months ago.

"Responses to the winter survey provide further indications that firms have faced a period of softness in economic conditions," the central bank said Monday in summarizing the opinions of Canadian business executives.

"While some forward-looking indicators of business activity have moved up from the levels recorded in the autumn survey, many firms cited concerns about demand over the next 12 months, as well as pressures related to increased competition."

Nevertheless, CIBC economist Peter Buchanan said the results are better than what might have been expected, given that the survey of senior management at 100 firms representative of the Canadian economy was conducted in late November and early December.

That was at a time when the economy was known to have slowed to 0.6 per cent growth in the third quarter and a crisis loomed over fears of massive tax increases and spending cuts south of the border, the so-called fiscal cliff that had threatened to drive the United States back into recession.

"Overall, it's somewhat better than expected. It does suggest Canadian sentiment did not take the hit some people might have feared over the United States fiscal cliff negotiations," Buchanan said.

He added that the level of optimism, however, was not as strong as what was seen coming out of the recession a few years back.

Scotiabank economist Derek Holt said the flagging capacity pressures back the view that Canada's output gap is growing, not shrinking, and larger than the Bank of Canada believes.

The results are in line with expectations the bank will downgrade its 2. …

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