With optimism at 6-year high, businesses expect higher sales and more hiring
Loonie has gained strength recently as market expects pending rate hike
The Bank of Canada has served up more evidence that the economy is revving up, releasing its latest quarterly business outlook survey that shows companies expect higher sales and more hiring.
The central bank said Friday that firms expect sales growth to improve, boosted by strength in services and recovering activity tied to the commodity sector.
At the same time, the central bank said an indicator of hiring intentions hit an all-time high.
"Results for nearly all the... survey questions are above their historical averages, pushing the indicator to its highest level since 2011." the Bank of Canada said.
"This result provides clear evidence of a generalized improvement in business sentiment," the bank said.
The summer survey, which was compiled between early May and early June, polls about 100 Canadian companies.
Economists took the report as another indication that the central bank will move to tighten monetary policy when it makes its next interest rate decision on July 12. A rate hike would be the first by the Bank of Canda in seven years.
"The broad details to the Bank of Canada's quarterly Business Outlook Survey lean toward reinforcing our hike expectations in July and a greater-than-priced tightening path therafter," said Scotiabank economist Derek Holt said in a commentary. "This is the strongest reading for hiring intentions in the two decade history of the survey,"
Loonie's path
The Canadian dollar has been on the rise recently, propelled higher by positive comments from bank governor Stephen Poloz and senior deputy governor Carolyn Wilkins about the health of the economy.
Earlier this week, Poloz reiterated that low interest rates put in place in 2015 have "done their job."
In the wake of those comments, the Canadian dollar climbed above 77 cents US. On Friday, the loonie was up more than one-fifth of a cent at 77.11 cents US.
An economist at BMO pointed that the central bank had the survey results as of June 5, and suggest that may have been what prompted the drastic shift in tone.
"Indeed, with only June employment and May international trade ahead of the July 12th policy meeting, there is little to keep the bank from hiking rates," said Benjamin Reitzes.