Canadian Sales Still Haven't Recovered From The Oil Price Shock

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OTTAWA — Canadian businesses are expecting only a marginal acceleration in sales growth over the next 12 months, a new Bank of Canada poll released Monday suggests.

The central bank's latest business outlook survey found that sales prospects remained gloomy among companies hit hard by the oil price slump.

"The moderation in future sales expectations was concentrated among firms in the Prairies, which see few signs of a recovery from the oil price shock,'' the bank's quarterly survey said.

stephen poloz
Stephen Poloz, governor of the Bank of Canada, pauses while speaking during a keynote address at the Canada-US Securities Summit in New York on April 26, 2016. (Photo: Victor J. Blue/Bloomberg via Getty Images)

But in other regions the poll said "steady, albeit modest, domestic momentum'' supported brighter sales outlooks.

The survey found that businesses outside the affected commodity industries and in the service sectors were more optimistic about the coming year. Rising demand from the United States and the past depreciation of the Canadian dollar remained key sources of stronger sales expectations, it found.

The survey also suggested that overall, firms generally expected to add jobs over the coming year — but found hiring intentions remained below post-recession levels and diverged considerably by sector.

stephen poloz
Stephen Poloz, governor of the Bank of Canada, speaks during a keynote address at the Canada-US Securities Summit in New York on April 26, 2016. (Photo: Victor J. Blue/Bloomberg via Getty Images)

Plans to reduce staff were prominent among companies in the goods sector, while firms in the service industries intended to boost their labour workforces to meet the growing demand, the bank's poll found.

Overall, the bank described its findings on hiring intentions as "modest.''

Firms also remained cautious about business investment, with many companies tied to the energy sector budgeting for further cuts, the survey said. However, businesses in the service sectors were found to be more willing to invest and expand, it said.

"While still pointing to an increase over the next 12 months, the balance of opinion on investment in machinery and equipment remains subdued,'' the report said.

"We're not out of the woods yet."

CIBC chief economist Avery Shenfeld said the survey indicates that the repercussions from the fall in energy prices will continue to be felt.

"We're not out of the woods yet,'' Shenfeld said in a note to clients. "The energy shock dented Canada over the past 12 months, but the Bank of Canada's latest survey suggests that the tide isn't yet turning back in our favour.''

The Bank of Canada's survey of about 100 companies was conducted between May 9 and June 8, and therefore doesn't reflect any potential changes in expectations linked to the United Kingdom's referendum to leave the European Union.

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