The brewing trade war between the U.S. and Canada hasn't put much of a dent in Canadian business leaders' optimism, with expectations for hiring and investment remaining "robust," the Bank of Canada said Friday.
Its latest business outlook survey found that businesses' investment plans, a key indicator of where the economy is headed, are "slightly weaker" than in the previous survey, but still strong.
And the employment indicator "continues to trend upward, pointing to broad-based hiring plans across the country," the bank said. Overall business optimism rose to near record levels.
"Who's afraid of Donald Trump? Apparently, not Canadian business leaders," CIBC Capital Markets chief economist Avery Shenfeld commented after the report's release.
Watch: Trump's threat of auto tariffs casts a shadow on Windsor, Ontario (story continues below)
Shenfeld suggested the report makes it likelier the bank will raise its key interest rate next month.
But the bank's report comes with a caveat: The survey was carried out between May 3 and June 5, meaning "almost all interviews were conducted before the announcement of tariffs on steel and aluminum imports from Canada by the U.S. administration on May 31."
That means they also took place before the unpleasantness between Trump and Trudeau at the G7 summit. Those events are likely to have taken some of the wind out of business leaders' sails.
But so far the data shows the economy continuing to put in a solid performance. Statistics Canada said Friday the country's economy expanded by 0.1 per cent in April, its third straight month of growth, despite analysts' predictions it would be flat or record a small decline.
Earlier on HuffPost Canada:
"Weather clearly played a role in the April numbers," CIBC economist Royce Mendes wrote in a client note. "The ice storm was an overall net negative for growth given that it left retailing, construction, food services and arts/entertainment/recreational activity weaker on the month. But it did provide a boost to utilities, which benefited from the extra heating days needed in central and eastern Canada."
Real estate also provided a boost to the economy. After shrinking for the first three months of the year, in the wake of new mortgage rules that reduced buying power, it expanded in April.
"The sector may be taking its first steps back towards growth," Mendes noted.
The Statistics Canada data landed on the same day that the federal government was expected to announce its final list of retaliatory tariffs against the U.S. While some analysts have warned the new tariffs will mean higher prices for consumers on some items, a new analysis from National Bank Financial estimates they will only raise consumer prices by just 0.1 per cent overall.
"In other words, while there are many things to worry about with regards to protectionism, higher consumer prices should be at the bottom of the list," economist Krishen Rangasamy wrote, "unless of course the Canadian dollar takes a deep enough dive as to cause a surge in import prices."
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