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Canadian Businesses Hampered by Weak Demand, Domestic Uncertainty: BOC

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Canadian Businesses Hampered by Weak Demand, Domestic Uncertainty: BOC

Canadian enterprises expect a challenging business environment in 2014, as weak global demand and domestic uncertainty could limit growth over the next 12 months.

The Bank of Canada’s winter Business Outlook Survey revealed broadly consistent trends with the previous report, suggesting Canadian enterprises face an uncertain climate in 2014. The report, which is based on interviews with 100 representative firms from across Canada, showed enterprises plan to keep hiring plans subdued this year as they focus on capacity-building expansion. While more than half of the firms surveyed said they intend to hire over the next 12 months, hiring plans were concentrated in the service sectors.

With regard to hiring, “The rise in intentions among service firms more than offset a decline among those in the goods sector,” the report said.

Hiring plans are largely a reflection of subdued business expectations over the next 12 months, especially internationally. While respondents indicated an improving outlook in the United States and the rest of the world, it is unclear how this will impact Canadian enterprises, which continue to struggle with a broad domestic slowdown.

Regarding investment, the BOC report said, “More businesses are planning increases in investment spending.” However, investment plans “are largely focusing on shorter-term projects aimed at upgrading existing equipment and technology.”

The Canadian economy took several steps backwards last year. Job growth amounted to 106,000, compared to 310,000 in 2012. Labour force participation declined 0.4 percentage points to 66.4 percent, as population growth outpaced workforce expansion. A sluggish export market, among other factors, forced the BOC to slash its growth forecast this year and next. According to BOC Governor Stephen Poloz, the Canadian economy won’t return to full capacity until the second half of 2015.

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