Released this week, the Bank of Canada’s Business Outlook Survey revealed that overall business sentiment remained weak with some positive signs in the fourth quarter of last year. 

The most significant economic headwinds cited by firms were sluggish consumer demand, uncertain economic conditions and taxes & regulators. Potential US tariffs are expected to raise input costs and weaken sales, but about three-quarters of businesses expect inflation to remain with the 1-3% range till 2026.

Having said that, sentiment has improved and this largely reflects ongoing interest rate cuts. Businesses see a boost in sales in the coming months. Labour shortages are less of a concern and hiring intentions remain soft as many firms are not facing binding capacity constraints. 

We don’t get a provincial breakdown, but this update included a special survey of oil and gas producers. The findings bode well for Alberta’s energy sector despite the volatility in markets and tariff threats by the new US administration (with no assurances this sector will be exempt).

The survey finds that business leaders in the oil and gas sector are more optimistic following the Trans Mountain Expansion (TMX) pipeline commencing operations last year, which has improved market access to Asian countries and delivered better pricing. Firms are similarly optimistic about LNG prospects, with Phase 1 of LNG Canada expected to be in service this year. 

As a result, oil and gas capital expenditures are pegged to grow by 4.2% while production is expected to rise 4.8% this year. These estimates for both, investment and production, are very much in line with our latest economic outlook released last month.

*The Business Outlook Survey was conducted from November 7 to 27, 2024. The survey is based on interviews with the senior management of about 100 firms selected to reflect the composition of the gross domestic product of Canada’s business sector.

Answer to the previous trivia question: The public lecture in which artificial intelligence pioneer Alan Turing said “what we want is a machine that can learn from experience” took place back in 1947.

Today’s trivia question: In what year did a computer program written by Christopher Strachey complete a game of checkers at a reasonable speed?