BMO Financial Group

BMO Financial Group
BMO Bank of Montreal

BMO Bank of Montreal

July 10, 2012 09:00 ET

Canadian Business Sentiment Holding Up-BMO Economics

BMO's Annual Business Survey shows that businesses are divided on outlook for economy, but are looking to improve productivity through investments

TORONTO, ONTARIO--(Marketwire - July 10, 2012) - The release of the Bank of Canada's Business Outlook Survey for the second quarter shows a retreat on sales but stability elsewhere, according to BMO Economics. This report supports similar findings from a BMO survey of Canadian businesses.

"Canadian business continues to put a brave face on the outlook," said Doug Porter, Deputy Chief Economist, BMO Capital markets. "The latest European flare-up and sagging U.S. job growth dented sentiment, but perhaps the biggest surprise is that firms remain relatively positive. Investment plans over the next 12 months held steady, while hiring intentions matched a record high at +53 per cent."

"Canadian businesses have shown a remarkable resiliency over the past couple years and are attuned to their unique markets and their customers. While cautiously optimistic, many businesses in Canada are focused on improving productivity through targeted investments in upgrading infrastructure and retooling business processes," said Cathy Pin, Vice-President, BMO Commercial Banking. "Recently, BMO announced a commitment to make $10 billion in credit available for Canadian businesses over the next 3 years; coupled with an attractive interest rate environment, now is a great time for businesses to make important investments that will help them grow." added Ms. Pin.

BMO's Annual Business Survey shows that businesses remain divided in their outlook for the Canadian economy, yet many are looking to make investments and hire this year.

Business Outlook on Economy

Canadian businesses are divided about the future of the Canadian economy with one third confident it will grow this year and almost four in ten believing it will remain the same as 2011. Regionally, Westerners are more confident in the outlook for the Canadian economy than business owners in Central or Eastern Canada.

Outlook for Canadian Economy NATIONAL BC AB MB SK ON QC ATL
GROW 34% 39% 56% 36% 53% 32% 23% 44%
SHRINK 22% 18% 4% 18% 7% 25% 29% 12%
REMAIN the SAME 39% 43% 34% 27% 40% 36% 44% 40%
DON'T KNOW 5% --- 6% 18% --- 8% 3% 4%

Top Challenges Cited by Businesses

According to the BMO survey, reduced consumer spending was cited as the greatest challenge faced by businesses this year. 51 per cent of businesses in the arts/culture, travel and tourism sectors were most likely to cite reduced consumer spending as their biggest challenge; by contrast only 14 per cent of businesses in the manufacturing, construction and mining/oil & gas sectors said it is a top concern. In those sectors, labour costs were the top issue at 26 per cent.

Greatest Challenges NATIONAL BC AB MB SK ON QC ATL
REDUCED CONSUMER SPENDING 22% 37% 20% 18% 27% 24% 17% 20%
ENERGY COSTS 16% 10% 16% 18% --- 19% 17% 16%
LABOUR COSTS 16% 20% 22% 18% 40% 10% 18% 12%
RAW MATERIAL COSTS 11% 6% 10% --- --- 9% 18% 8%
GLOBAL ECONOMY 9% 12% 8% 7% 9% 11% 5% 16%
U.S. ECONOMY 7% 8% 8% --- --- 10% 5% 8%

Investing in Business

Looking ahead, nearly six in ten Canadian business owners plan to invest in their business this year and into 2013. Of those businesses that plan to make investments, 88 per cent plan to invest the same or more than they did last year.

Plan to Invest in Business NATIONAL BC AB MB SK ON QC ATL
YES 59% 59% 54% 36% 60% 60% 57% 72%
NO 36% 35% 38% 55% 40% 34% 39% 24%
Don't Know 5% 6% 8% 9% --- 6% 4% 4%

Hiring Intentions

According to the BMO survey, 46 per cent of Canadian businesses plan to hire new employees this year, while slightly more (51 per cent) do not have plans to add additional staff this calendar year. For those companies who indicated that they are looking to hire this year, 51 per cent have plans to hire more than they did last year.

Plan to Hire in 2012 NATIONAL BC AB MB SK ON QC ATL
YES 46% 55% 44% 55% 33% 44% 47% 40%
NO 51% 45% 50% 36% 60% 53% 49% 60%

Consumer Confidence and Prices

With reduced consumer spending ranked as one of their biggest challenges this year, the majority (67 per cent) of Canadian businesses have no plans to increase prices.

Plan to Charge Customers NATIONAL BC AB MB SK ON QC ATL
The SAME 63% 67% 62% 64% 67% 67% 58% 52%
LESS 4% 6% 2% 9% --- 4% 3% 8%
MORE 30% 25% 34% 18% 33% 26% 36% 36%
DON'T KNOW 3% 2% 2% 9% --- 3% 3% 4%

The survey also found that in the past year Canadian businesses have taken a number of steps to improve their business performance. According to the BMO study, 36 per cent say that lower interest rates have had the most positive impact on their business, 47 per cent point to productivity improvements such as upgrading equipment and processes and 49 per cent say lowering expenses/costs have had the most positive effect on their business performance.

The online survey was conducted by Leger Marketing between March 21, 2012 and April 12, 2012, using a sample of 500 Canadian small business owners. A probability sample of the same size would yield a margin of error of ±4.38 per cent, 19 times out of 20.

About BMO Financial Group

Established in 1817 as Bank of Montreal, BMO Financial Group is a highly-diversified North American financial services organization. With total assets of $525 billion as at April 30, 2012, and more than 46,000 employees, BMO Financial Group provides a broad range of retail banking, wealth management and investment banking products and solutions.

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