The Bank of Canada released its Summer Business Outlook Survey (BOS)* this morning, covering an interview period from mid-May to early June. In all provinces and all sectors, the sentiment was hugely negative owing to the impact of the pandemic and falling oil prices.
Since the previous survey, conducted before concerns about COVID-19 has intensified, but as oil prices had already started to fall, business confidence plunged. Surprisingly, however, the business sentiment was not as negative as during the 2007-09 global financial crisis (see Chart 1 below). This was mainly due to the government support offered to cushion the blow of the pandemic. Also, many firms expect a reasonably quick rebound in operations after a temporary decline in sales, unlike the 2007–09 crisis when businesses anticipated persistent weakness in demand.
Highlights of the BOS:
- Forward-looking sales indicators have collapsed. Many businesses referred to elevated uncertainty. Still, roughly half of firms anticipate that their sales will recover to pre-pandemic levels within the next year.
- Businesses in most regions and sectors intend to cut their investment spending significantly. Hiring plans are muted, although a quarter of firms plan to refill some positions after recent layoffs.
- Reports of capacity pressures and labour shortages have fallen significantly. This suggests a substantial widening in economic slack.
- Expectations for input and output price growth, as well as for overall inflation, are all down considerably.
- Credit conditions have tightened significantly, but government measures are a helpful offset.
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