Business Owners Look Ahead with Tempered Optimism

Firms expect higher sales growth in 2013 but cite concerns about demand and competition, says Bank of Canada survey

Written by Kim Hart Macneill

Canadian businesses ended the year in a period of soft economic conditions but look toward the year ahead with tempered optimism, according to the Bank of Canada’s Winter Business Outlook Survey. The quarterly survey polls the senior management of 100 firms, selected according to the composition of the country’s gross domestic product.

Respondents reported little change in sales growth over the past12 months, with 33% reporting their sales volumes increased at a greater rate over that period, 32% saying it stayed the same and 35% reporting slower growth. But the balance of opinion, or the percentage reporting faster growth minus the percentage reporting slower growth, crossed into the negative for the first time since the first quarter of 2010.

Despite a slow 2012, 44% of respondents expect sales volumes to grow at a greater rate in 2013, while only 28% expect slower growth. These numbers are an improvement over the autumn survey, in which the percentage of respondents expecting greater sales growth was equal to those expecting less.

The bank says this increase reflects “efforts of some firms to generate higher sales growth over the next 12 months by pursuing new business opportunities or adopting strategies to maintain market share in a challenging demand environment.” These firms were most often located in Central and Eastern Canada or operating in the manufacturing sector. Overall, more firms reported concerns about the outlook for domestic demand and increased pressure from domestic and foreign competition.

While hiring intentions remained low for the second consecutive quarter, the percentage of firms planning to increase investment spending over the next 12 months was 43%, up from 37% in the autumn survey. “For many businesses, the general focus of investment spending pertains to ways to use existing capital more intensively or to become more competitive,” said the report, rather than increased spending on new projects.

The survey was conducted between Nov. 19 and Dec. 13, amid heavy media coverage of the impending U.S. fiscal cliff. TD economist Diana Petramalta says the coverage likely “tempered expectations on future growth, so we’re likely to see more of a bigger bounce in the quarter coming.”

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