Monday, July 6, 2020 - 10:32

MNI POLICY: BOC Biz Poll Shows Covid Hit Less Than 2008 Slump

--BOC Quarterly Poll Taken As Health Curbs Being Lifted

OTTAWA (MNI) - The Bank of Canada's first quarterly business outlook published after the nadir of Covid-19 restrictions indicated companies were less pessimistic than they were during the 2008-09 recession as health lockdowns eased and governments stepped up with relief payouts.

"Indicators of employment intentions, input price growth and credit conditions did not deteriorate as much as they did during the 2007- 09 crisis," the central bank said in a report Monday. "This is due partly to the government support offered to mitigate the impacts of the pandemic. This also reflects that many firms expect a fairly quick rebound in operations after a temporary decline in sales, unlike the 2007-09 crisis when businesses anticipated persistent weakness in demand."

The survey was taken from mid-May to early June when many business re-openings were underway, with about half of firms saying sales will rebound within the next year. While most firms could resume normal production within a month of health restrictions being lifted, the survey showed much greater concern about demand remaining sluggish especially for services that require people to be close together.

Even with the survey's timing being more favorable to reduced pessimism, "business sentiment is strongly negative in all regions and sectors" the BOC report said. The closely-watched balance of opinion on future sales was a record low -35 from +22 in the first quarter, and the investment balance of opinion was -30.


The BOC's consumer sentiment survey was more pessimistic, even as most of the government's record deficit spending was aimed at household relief checks. The survey showed a record 18% of people saying their job is at risk, while expected income growth was a record low 1.9%.

"Another sign of caution is that many respondents expect their work to return to normal sooner than their spending and social habits. This points to some excess supply and disinflationary pressures," the BOC report said.

The BOC cut interest rates by 150bps in March to 0.25% and is now buying at least CAD5 billion of Canadian government securities each week to keep major financial markets liquid. The surveys are the last public report from the BOC before a July 15 policy decision, and new Governor Tiff Macklem has said rates are at the lower bound and more QE will be the main tool through the economic recovery.

--MNI Ottawa Bureau; +1 613-314-9647; email:

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