ECONOMIC OUTLOOK
Economy strong, business leery
Companies having difficulty meeting demand, Bank of
Canada
survey finds
HEATHER SCOFFIELD
ECONOMICS REPORTER
January 15, 2008
About 60 per cent of the companies that responded to the central bank's quarterly survey said they were having difficulty meeting demand, especially in the services sector. That's a record high for the survey - and a key indicator that the Canadian economy is facing capacity restraints.
"Pressures remain elevated in
Still, companies said they expect inflation to remain firmly in check, mainly because of the strong dollar and reduced momentum in commodities prices.
Print Edition - Section Front
Generally, companies were upbeat about improving business prospects in the coming year, but also said they were not confident about their outlook, mainly because of economic volatility and the exchange rate.
"Expectations of solid domestic demand are helping to offset the dampening effect of the most recent appreciation of the Canadian dollar and a weaker outlook for
For the first time, the Bank of Canada included information on credit conditions in its quarterly survey. The results show a significant tightening of credit conditions over the past six months, reflecting the impact of the global credit crunch that began last August.
Credit conditions should give an indication about future business investment. However, the central bank warns that the results are not reliable because companies' response to the question was low.
The quarterly Business Outlook Survey figures prominently in the central bank's thinking about monetary policy. The bank is widely expected to cut its key interest rate again next week, and there does not appear to be much in the winter outlook to stand in the way of another rate cut.
By the numbers
42%
Proportion of respondents who said they'd have 'some difficulty' meeting an unexpected increase in demand. Some 18 per cent said they'd have 'significant difficulty.'
41%
Respondents who said their company faced a shortage of labour, restricting its ability to meet demand.
2-3%
Annual rate of inflation that 56% of respondents said they expected over the next two years.
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