NEW YORK (MaceNews) – Canadian business and consumer sentiment dropped in response to the Covid-19 pandemic and the drop oil prices, the Bank of Canada reported Monday.
The bank’s quarterly survey of businesses, conducted from mid-May to early-June, as government restrictions were starting to ease, found businesses in all regions and sectors “reported that weak demand is reducing both capacity pressures and expectations for price growth,” the BOC said.
“The overall Business Outlook Survey indicator fell sharply, with most constituent indicators declining to levels well below their historical averages. As businesses expect weakness in domestic and foreign demand to continue due to impacts from COVID‑19 and low oil prices, forward-looking sales indicators have collapsed. Many businesses referred to elevated uncertainty.”
“Still, roughly half of firms anticipate that their sales will recover to pre-pandemic levels within the next year. Businesses in most regions and sectors intend to significantly cut their investment spending. Hiring plans are muted, although a quarter of firms plan to refill some positions after recent layoffs.”
“Reports of capacity pressures and labour shortages have fallen significantly. This suggests a substantial widening in economic slack. Expectations for input and output price growth as well as for overall inflation are all down considerably because of weak demand related to the pandemic. But the majority of firms continue to expect inflation to be within the Bank’s inflation control target range of 1 to 3 percent. Credit conditions have tightened significantly, but government measures are a helpful offset.”
The bank’s separate Survey of Consumer Expectations conducted May 11-June 1, 2020, found most measures of consumer sentiment deteriorated in response to the pandemic and measures taken to contain it. Views on labor market conditions, expectations for wage growth, household income, and house price growth all dropped.
The latest survey found consumer expectations for inflation increased over the one-year horizon, were stable for the two-year timeframe, and down for the five-year outlook.
Consumers expressed high levels of caution in connection with the impact of the pandemic, and planned to focus spending on essentials while spending less on durable goods and services requiring in-person interactions.