By Kim Mackrael
OTTAWA--Business sentiment in Canada strengthened in the late fall as domestic and foreign demand increased and optimism grew about the effectiveness of vaccines against Covid-19, a Bank of Canada survey found.
The central bank's quarterly business outlook survey found that investment and hiring plans had strengthened compared with the previous three-month period. Still, about half of businesses reported that their current sales are below pre-pandemic levels, and about a third said they anticipate their sales will remain below that benchmark over the next 12 months.
The survey was conducted between mid-November and early December, before many regions tightened economic restrictions to address a surge in Covid-19 cases. Canada's two most populous provinces, Ontario and Quebec, both closed non-essential businesses in recent weeks to address the rising caseload and a growing burden of Covid-19 on hospitals in some regions.
Nationwide, the seven-day average of reported Covid-19 cases in Canada has roughly doubled over the past two months, according to data from Johns Hopkins University. Government figures show Covid-19 hospitalizations were at a higher level in early January than they were at any point during the spring.
The Bank of Canada survey found an improvement in the investment outlook for machinery and equipment, with many firms saying they planned to expand operations and boost productivity through more automation and digitalization.
Meanwhile, businesses' inflation expectations eased slightly following a rebound in the previous survey, the central bank said. The majority of firms anticipate inflation over the next two years will be in the lower half of the Bank of Canada's 1% to 3% target range.
A separate survey of consumer expectations, conducted by the Bank of Canada during the last three weeks of November, found Canadians were more concerned about health risks compared with the summer. Consumers said they were taking more precautions amid rising Covid-19 cases while adapting to continued government restrictions, the survey said.
The Bank of Canada's next interest-rate decision is due Jan. 20. The central bank has offered guidance that it is unlikely to raise interest rates above 0.25%, which officials consider the lowest effective level, for at least two years.
Write to Kim Mackrael at kim.mackrael@wsj.com
(END) Dow Jones Newswires
01-11-21 1052ET
