OTTAWA — The sting of lower oil prices has reduced the confidence of companies when it comes to future sales growth, investment and hiring, the Bank of Canada says in its latest business outlook.
The central bank's quarterly sampling of 100 representative businesses, released Monday, suggested that a drop in crude oil prices since November has even eroded sales expectations beyond the energy sector, such as those down the supply chain.
"More businesses than in previous surveys anticipate an outright decline in sales volumes," the document said.
The survey, conducted between Feb. 17 and March 12, also found dimmer expectations about future investments in machinery and equipment for the coming year, particularly in the goods sector and those hit hard by lower oil prices.
Expectations were higher in the previous report, based on a survey between Nov. 17 and Dec. 11, near the beginning of a sudden, deep decline in oil prices that is expected to persist for an extended period.
The influential questionnaire also found the outlook for hiring had diminished to its lowest level since 2009.
"Hiring intentions are weaker for most sectors and regions, but especially for firms tied to the energy sector, which plan to reduce the size of their workforces in light of lower oil prices," the report said.
This was the Bank of Canada's first business outlook survey since governor Stephen Poloz surprised markets in January by cutting the central bank's overnight interest rate. At the time, he said the move was "insurance" against the anticipated economic impact of falling oil prices.
Crude is currently trading near or below US$50 a barrel. It began a rapid descent in November after Saudi Arabia announced it wouldn't reduce output to support prices, which had fallen from a summer peak at about US$107 a barrel.
BMO chief economist Douglas Porter wrote that he diidn't believe the "sluggish" results of the latest Bank of Canada survey increased the odds that Poloz would introduce another cut at next's rate announcement on April 15.
"While we don't dismiss the chances of such, it will take some significant new disappointment to advance the cause," Porter wrote.
The survey also found a growing number of companies expected to see lower input costs because of cheaper oil prices, though some anticipated the lower Canadian dollar to partially offset those gains.
The bank said more businesses expected the weaker exchange rate to help boost output prices over the coming 12 months.
The survey's outlook for the U.S. economy was strong, with most companies anticipating Canada's biggest market will help boost future sales.
Several firms reported foreign demand had increased thanks to the weakened Canadian dollar. But the survey said many businesses only expected some of the benefits from the exchange rate and cheaper crude to surface gradually, over time.
In a separate report released Monday, the central bank found overall business-lending conditions were largely unchanged in the first quarter of 2015 — except for firms in the battered oil and gas sector.
While energy companies experienced a tighter lending environment, borrowers in other sectors reported that conditions remained "highly accommodative," the bank's senior loan officer survey found.
