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Business sentiment improves as firms look past pandemic, Bank of Canada says

FILE PHOTO: A sign is pictured outside the Bank of Canada building in Ottawa

By Julie Gordon

OTTAWA (Reuters) - Business sentiment in Canada continues to improve and many firms consider the impacts of the COVID-19 pandemic behind them, though the outlook remains challenging for high-contact services, a Bank of Canada survey showed on Monday.

The survey, conducted before new restrictions came into effect earlier this month to tackle a third coronavirus wave, found sales were at or above pre-pandemic levels for 64% of businesses.

"With uncertainty having receded and vaccination rollouts continuing, firms' indicators of future sales have strengthened again," the central bank said in its spring Business Outlook Survey. The BOS indicator hit its highest level since mid-2018.

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"For many businesses, demand from domestic and foreign customers - particularly from the United States - has improved from a year ago," it added. The United States is Canada's largest trading partner.

That booming demand has businesses planning to increase investment spending to add capacity, often through digitization and automation, the Bank of Canada said.

Most companies have plans to hire, and many noted difficulties finding new workers. Staffing challenges are most severe in the skilled trades and information technology, as well as in rural areas.

Still, nearly 20% of firms - many in high-contact services like tourism and non-essential retail - are struggling and do not expect their sales to return to pre-pandemic levels in the next year.

The survey of 100 firms took place between February 16 to March 8, as COVID-19 cases fell and restrictions resulting from the second wave were being loosened.

In a separate study, the Bank of Canada found consumer expectations of home price growth rose again in the first quarter of 2021, hitting the highest point since 2016.

Canada's red-hot housing market has bolstered the country's economic recovery from the COVID-19 pandemic, but the market imbalances are escalating and driving up already-high household debt, the Bank of Canada said on Friday.

(Reporting by Julie Gordon and David Ljunggren in Ottawa; Editing by Paul Simao)