Daily Economic Comment - Canadian Businesses Less Optimistic
Posted By: Todd Hirsch, Senior Economist, ATB Financial Jan 9, 2012
Economists track a lot of numbers - stock market movements, capital flows, and currency exchange rates - to get a sense of what the economy is doing. But much insight can be gained simply by going out and asking companies what they’re experiencing. And according to one survey Canadian firms are less optimistic.
In the most recent Business Outlook Survey (BOS) of the Bank of Canada, released this morning, companies are reporting lower expectations for sales growth in the next 12 months. It is the first time since the beginning of 2009 that more companies expect the rate of sales growth to fall rather than rise. (the BOS is a survey of about 100 firms across the country, and was conducted between Nov. 14th and Dec 14th, 2011)
On the surface, this seems like troubling news. But digging a little deeper, it may not be so bad. The survey question asks companies; “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?” The question is about the rate of change, not he level of sales. So, if a company saw sales increase 5% last year, and is expecting sales to increase 4% this year, they would respond “grown at a lesser rate” – even though sales are still climbing.
While the BOS does not offer regional statistics, it did state in the report: “Firms in Western Canada, notably those in the prairies, expect sales growth to slow from the recent strong pace, while other continue to expect modest growth similar to that experienced over the past 12 months.” But that could simply suggest 2011 was a very strong growth year for sales by firms on the prairies, whereas sales in 2012 are still expected to grow…..just at a slower pace.