The Business Outlook Survey released by the Bank of Canada on Monday, showed that futures sales balance jumped to the highest since 2009, recovery remains uneven and that inflation expectations edged higher, but remain in the central bank’s target range, explained analysts at RBC Capital Markets.
Key Quotes:
“Businesses were more confident in the economic recovery from mid-February to mid-March. Expected future sales rose to the highest level since 2009 – despite a still exceptionally challenging outlook for firms in high-contact service sectors. The Bank of Canada’s survey was collected during the lull in virus spread between the second and third virus waves in Canada. But restrictions re-implemented to-date have once again largely targeted high-contact service-sectors that were already very weak. The rest of the economy has likely continued to improve to-date.”
“The more optimistic tone reinforces that the economic bounce-back could be sharp once virus risks recede. That, in turn, depends on vaccine distribution ramping up, with the Bank of Canada unlikely to want to significantly tap the brakes on monetary policy stimulus until that recovery is more assured. But more optimism from businesses, and some early evidence inflation expectations are edging higher, sets up for the central bank to announce a reduction in the pace of asset purchases in April, and we continue to expect the beginning of a gradual interest rate hiking cycle to start next year.”
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