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Business Outlook Survey
Conducted by the Bank’s Regional Offices
Results of the Spring 2009 Survey Vol. 6.1 13 April 2009
Chart 1: Past Sales Growth: Balance of Opinion*
Over the past 12 months, did your firm’s sales volume increase at
Overview a greater, lesser, or the same rate as over the previous 12 months?
%
40 40
• Business sentiment remains negative. While
30 30
some indicators have inched up from his-
20
torical lows, the results of the spring survey 20
continue to suggest a weak outlook for the 10 10
Canadian economy. 0 0
• Firms continue to expect sales growth to slow -10 -10
over the next 12 months, and many antici- -20
-20
pate an outright decline in sales volumes.
-30 -30
Investment and hiring intentions are weak, 2001 2002 2003 2004 2005 2006 2007 2008 2009
and the level of uncertainty remains high.
Greater: 30% Same: 22% Lesser: 48% No response: 1%
• Reported pressures on production capacity * Percentage of firms reporting faster growth minus percentage reporting slower growth
have eased further, particularly among firms
in Western Canada, and labour shortages are
at a record-low level. Input and output prices Chart 2: Future Sales Growth: Balance of Opinion*
are both expected to grow at a slower pace Over the next 12 months, is your firm’s sales volume expected to increase
at a greater, lesser, or the same rate as over the past 12 months?
over the next 12 months, and expectations
%
for inflation over the next two years have 0 40
declined. 30
0
0 20
0 10
0 0
Business Activity 0 -10
0 -20
The balances of opinion for both past and future sales
0 -30
remain markedly negative, although no longer at
0 -40
record-low levels (Charts 1 and 2). As in the winter 2001 2002 2003 2004 2005 2006 2007 2008 2009
survey, many firms expect a decline in their sales
www.bankofcanada.ca
Greater: 30% Same: 18% Lesser: 52% No response: 1%
volumes over the next 12 months. This weak outlook * Percentage of firms expecting faster growth minus percentage expecting slower growth
The Business Outlook Survey summarizes interviews conducted by the Bank’s regional offices with the senior management of about 100 firms selected
in accordance with the composition of Canada’s gross domestic product. The survey’s purpose is to gather the perspectives of these businesses on
topics of interest to the Bank of Canada (such as demand and capacity pressures) and their forward-looking views on economic activity. Additional
information on the survey and its content is available on the Bank of Canada’s website at <www.bankofcanada.ca/en/bos/index.html>. The spring 2009
survey was conducted from 23 February to 20 March 2009. The balance of opinion can vary between +100 and -100. Percentages may not add to 100
because of rounding.
The opinions expressed are those of the respondents and do not necessarily reflect the views or policies of the Bank of Canada. The method of sample
selection ensures a good cross-section of opinion. Nevertheless, the statistical reliability of the survey is limited, given the small sample size.
ISSN 1916-4068 (Print)
ISSN 1916-4076 (Online)
is widespread, since the global recession is expected Chart 3: Investment in Machinery
and Equipment: Balance of Opinion*
to continue to affect foreign and domestic demand Over the next 12 months, is your firm’s investment spending on M&E
across the country. Again in this survey, uncertain expected to be higher, lower, or the same as over the past 12 months?
%
economic conditions led many firms to cite downside 40
40
risks to their outlook. 30 30
20 20
While it has improved somewhat, the balance of 10
10
opinion on investment in machinery and equipment 0
0
remains negative, indicating that firms expect to invest -10
10
less over the next 12 months (Chart 3). Businesses -20
20
are postponing expansion plans and focusing 30 -30
investment spending on essential repairs and the 40 -40
2001 2002 2003 2004 2005 2006 2007 2008 2009
replacement of existing equipment. Intentions to lower
investment spending are more prominent in Western Higher: 26% Same: 32% Lower: 40% No response: 3%
* Percentage of firms expecting greater investment minus the percentage expecting
Canada than in Central and Eastern Canada.
less investment
The balance of opinion on employment for the next Chart 4: Future Employment Level: Balance of Opinion*
Over the next 12 months, is your firm’s level of employment expected to
12 months indicates that firms expect the level of be higher, lower, or the same as over the past 12 months?
%
employment to be about the same as over the past
60
12 months (Chart 4). Unlike the past few surveys, the
50
hiring intentions of firms in Western Canada are now
40
weaker than those of firms in the rest of the country.
30
20
10
0
-10
2001 2002 2003 2004 2005 2006 2007 2008 2009
Higher: 25% Same: 50% Lower: 26%
* Percentage of firms expecting higher levels of employment minus the percentage
expecting lower levels
Pressures on Production Chart 5: Ability to Meet Demand
How would you rate the current ability of your firm to meet an unexpected
Capacity increase in demand?
%
The percentage of firms reporting that they would have 60 60
difficulty meeting an unexpected increase in demand 50 Ca
50
has fallen further, reaching its second-lowest level
40 Ca
40
on record (Chart 5). Capacity pressures eased signifi-
cantly in Western Canada, closing the gap observed in 30 30
recent years between these firms and those based in 20 20
Central and Eastern Canada.
10 10
0 0
2001 2002 2003 2004 2005 2006 2007 2008 2009
Significant difficulty: 1%
Some difficulty: 29%
BUSINESS OUTLOOK SURVEY
2 BANK OF CANADA APRIL 2009
Chart 6: Labour Shortages The percentage of firms reporting that labour shortages
Does your firm face any shortages of labour that restrict
your ability to meet demand? are restricting their ability to meet demand has fallen
% again to reach a new record low (Chart 6). There were
60
60 fewer reports of shortages in all sectors, with the majority
50
of respondents indicating that labour shortages were less
50
intense than 12 months ago.
40 40
30 30
20 20
10 10
2001 2002 2003 2004 2005 2006 2007 2008 2009
Yes: 13%
The summer 2006 results are not strictly comparable with those of the other
surveys, owing to a difference in the interview process for that survey.
Chart 7: Input Price Inflation: Balance of Opinion*
Over the next 12 months, are prices of products/services purchased expected
Prices and Inflation
to increase at a greater, lesser, or the same rate as over the past 12 months?
Firms continue to expect slower growth in input prices
%
40 40 over the next 12 months (Chart 7), and a number believe
30 30 that input prices will decline outright. Firms cited a broad
20
20 list of inputs, in addition to those related to energy and
10 10
commodity prices, for which prices are expected to
0 0
increase at a slower pace, owing to weak economic
-10 -10
-20
conditions. Nonetheless, the balance of opinion is less
-20
-30 -30 negative than in the winter survey, partly because the
-40 -40 recent depreciation of the Canadian dollar has raised the
-50 -50 prices of imports.
2001 2002 2003 2004 2005 2006 2007 2008 2009
Greater: 24% Same: 19% Lesser: 57% The balance of opinion on output prices has reached
* Percentage of firms expecting greater price increases minus the percentage expecting its lowest level since the survey began in 1997 (Chart 8),
lesser price increases
suggesting that output prices are expected to grow at
Chart 8: Output Price Inflation: Balance of Opinion* a slower pace than over the past 12 months, and many
Over the next 12 months, are prices of products/services sold expected to
increase at a greater, lesser, or the same rate as over the past 12 months? firms anticipate price reductions. An environment of
% weak demand was cited as the main factor driving down
30 30
the expected growth in output prices, but slower growth
20
20 of input prices continues to have an effect. Both the
10 10 goods and services sectors expect a slowdown in the
0 0 growth of output prices, but the decline in the balance of
-10 -10 opinion since the winter survey is entirely due to services-
-20 -20 producing firms.
-30 -30
-40 -40
2001 2002 2003 2004 2005 2006 2007 2008 2009
Greater: 25% Same: 16% Lesser: 59%
* Percentage of firms expecting greater price increases minus the percentage expecting
lesser price increases
BUSINESS OUTLOOK SURVEY
BANK OF CANADA APRIL 2009 3
Inflation expectations continue to decline (Chart 9). Chart 9: Inflation Expectations
Over the next two years, what do you expect the annual rate of inflation to be,
For the second consecutive survey, three-quarters of based on the consumer price index?
firms expect inflation to be below the 2 per cent target %
midpoint of the Bank’s inflation-control range over the 0 80
next two years, and many expect inflation to fall below 0 70
1 per cent. The current economic slowdown was the 0 60
50
factor most often cited for a low inflation outlook. 0
0 40
0 30
0 20
0 10
0 0
2006 2007 2008 2009
Below 1%: 41% 2 -3%: 15% No response: 4%
1%-2%: 37% Above 3%: 4%
Chart 10: Credit Conditions: Balance of Opinion*
Credit Conditions Over the past three months, how have the terms and conditions for obtaining
financing changed (compared with the previous three months)?
The balance of opinion on credit conditions remains
%
positive, although no longer at a record level, indi- 60 60
cating that firms faced tighter terms and conditions 50 50
40
for obtaining financing over the past three months 40
30 30
(Chart 10). Regardless of where firms sourced their
20 20
financing, a tightening of credit was reported, mainly 10
10
in the form of higher borrowing costs. 0 0
-10 -10
-20 -20
-30 -30
2001 2002 2003 2004 2005 2006 2007 2008 2009
Tightened: 44% Not changed: 48% Eased: 8%
* Percentage of firms reporting tightened minus percentage reporting eased. For this
question, the balance of opinion excludes firms that responded “not applicable.”
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BUSINESS OUTLOOK SURVEY
4 BANK OF CANADA APRIL 2009
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