Bank of Canada survey revealed a worsening business outlook in Q3 🔎

Business confidence in Canada reached a post-pandemic low in the third quarter, as revealed by a Bank of Canada survey. Companies reported a worsening sales outlook and challenges in meeting short-term financial commitments due to rising interest rates. While inflation expectations have slightly eased, they remain historically high. The Bank of Canada, which kept its benchmark interest rate at 5% last month, has expressed concerns about persistent inflationary pressures. The survey also highlighted that higher rates are adversely affecting over 70% of Canadian firms, with many experiencing a slowdown in consumer demand.

Inflation in Canada, like in the US, has rebounded slightly recently. However, the more concerning is that despite high interest rates, companies' expectations for price increases remain high as indicated in the conducted survey.

Key Conclusions from the Survey:

• Business confidence in Canada hit a post-pandemic low in Q3 and companies report a deteriorating sales outlook.
• 53% of companies expect the consumer-price index to be at 3% or higher over the next two years.
• Over 70% of Canadian firms, across goods and services sectors, say higher rates negatively impact them.
• A separate BoC Q3 survey on Consumer Expectations shows 55% of Canadians expect a recession the next year, up from 50% in Q2.
• One-third of firms expect Canada to be in a recession over the next year, the same as in Q2
• 42% expect sales volume to increase in the next 12 months, while 28% anticipate a decline.
• One in three businesses anticipate a reduction in capital spending in the next year due to tighter credit conditions.
• Hiring intentions are below historical averages, but only 12% of companies plan to reduce staff.

Looking at the USDCAD chart, the currency pair is in a long-term upward trend. On the chart, we see that the currency pair is bounded on both sides by lines that form a triangle pattern. Both the lower and upper boundaries have been confirmed multiple times. Currently, USDCAD is in the support area at the 1.364 level, and after the recent reaction to the upper boundary, we should expect a further downward trend in the rate.