NEWS

Bank of Canada survey shows oil dimming corporate confidence

04/06/2015 11:46 EDT | Updated 06/06/2015 05:59 EDT
The Bank of Canada says cheaper oil prices are hurting sales forecasts and starting to hit confidence in industries far beyond the energy sector.

In its quarterly Business Outlook Survey, the central bank surveyed 100 representative companies across various Canadian industries and found that broadly speaking, cheaper oil has reduced sales expectations and cut into confidence in doing things like investing in new equipment and machinery, and possibly hiring new staff.

Although it remains in a range the bank calls "positive," the outlook for hiring has dropped to its lowest level since 2009, when the world economy was in recession just about everywhere following the credit crisis.

Forty of the companies surveyed said they expect to hire more people in the next 12 months than they did in the previous 12. Another 40 said they expect to hire the same amount, with the remaining 20 saying they expect to hire less.

Good news?

If there's a source of strength, it's that the bank's report suggests companies with strong ties to the U.S. economy are more upbeat. The U.S. is benefiting more from cheap oil than most economies, because it is the most diverse economy on earth and cheaper energy is good news for virtually every other sector.

"Firms' outlook for the U.S. economy is generally strong, with the majority expecting this strength to support their future sales," the report says. Cheaper oil has also hurt the loonie, which exporters to the U.S. cited as another reason for cautious optimism about sales from here on out.

"While many firms outside the energy sector characterize the effects of lower oil prices and the weaker Canadian dollar as favourable for their business outlook, they expect some of the benefits to unfold only gradually in the future," the report says.

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