Bank of Canada survey indicator showed lowest level seen in more than a decade
Business sentiments in Canada continued to weaken in the third quarter as companies expected growth in sales to slow down as 2024 approaches, according to the Bank of Canada’s latest business outlook survey indicator.
The central bank interviewed business leaders from firms in order to gather a broad range of economic perspectives. It found that the business outlook survey indicator had reached the lowest level seen in more than a decade, not counting the brief period at the onset of the COVID-19 pandemic.
The central bank’s survey showed that the negative effects of the high interest rates were spreading as more businesses believed that the rates would restrain plans for sales and investments. A third of the companies surveyed stated that their sales had decreased significantly over the past year as demand continued to slow.
Many businesses still expected that inflation would take longer than three years to return to the 2% target that was set by the Bank of Canada. About a third of companies continued to plan for a recession in the coming year.
In the survey of consumer expectations, consumers believed that inflation would continue to be elevated, marking an unusually wide gap between the perception and actual state of inflation. The most pressing concern among them continued to be rising cost of living as many expect that households will still experience the impact of higher interest rates.
The consumer report stated that those who were anticipating the more intense effects of inflation were less likely to make any major purchases. Consumers said they were much more likely to spend money on discretionary items other than those that were typically financed with loans.
Canada’s annual inflation rate sat at 4% in August, significantly down over the same time last year but still well above the Bank of Canada’s target rate of 2%. The central bank kept its interest rate on hold at 5% in its last announcement but has reaffirmed that it is prepared to raise the rates if needed. Its decision regarding the interest rate as well as the monetary policy report will be available on October 25.
