Oil plunge hits energy firms' outlook hard: Bank of Canada survey

[OTTAWA] The plunge in oil prices has significantly dampened the outlook for Canadian companies tied to the energy sector, though overall business sentiment remains positive with sales expected to grow at a slightly faster pace this year, a Bank of Canada survey showed on Monday.

The central bank's quarterly business outlook survey showed that companies anticipating a positive impact from the US economic recovery are more optimistic than others.

The balances of opinion on employment and investment in the machinery and equipment sector declined overall, though hiring intentions and investment plans were more robust for manufacturers than for companies in other sectors.

Overall investment intentions were sharply lower compared with the previous survey, primarily owing to lower expectations from Western Canadian companies amid the collapse in oil prices, the survey said.

"Oil price developments have led many firms to be more uncertain about the outlook for their businesses, which has had an impact on their upcoming investment projects," the survey said.

The drop in oil also weighed on inflation expectations, with a majority of businesses expecting total consumer price index inflation over the next two years to be in the bottom half of the Bank of Canada's one to 3 per cent target range.

Separately, a Bank of Canada survey of senior loan officers showed business lending conditions were nearly unchanged during the fourth quarter.

REUTERS