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Overall, businesses continue to be positive about the outlook for the next 12 months. While survey responses generally still indicate modest growth, with many firms citing headwinds from strong competition and moderate demand, the strength in commodity prices has led to increased optimism among those firms tied to commodity-related activity.

We analyze Canadian data from the Bank of Canada’s Business Leaders’ Pulse, examining firms’ sales growth expectations. We find that expected growth predicts outcomes, uncertainty influences forecast errors and revisions, and firms with weak past performance anticipate and experience weaker future growth. These results highlight the survey’s value for understanding business expectations.

Responses to the winter survey suggest that the global economic outlook and concerns about demand continue to weigh on firms’ expectations for business activity.

The autumn Business Outlook Survey shows that firms’ expectations continue to diverge as they gradually adjust to an environment of weaker commodity prices and a lower Canadian dollar. The overall sales and investment outlook improved, owing in part to continued support from U.S. demand. However, business sentiment remains weak for firms directly and indirectly tied to the resource sector.

Businesses are more optimistic about the economic outlook than in the winter survey. The greater stability of the Canadian dollar in the three months since the previous survey has helped to ease concerns among exporters. Businesses continue to expect strong domestic sales.

This monthly newsletter features the latest research publications by Bank of Canada economists including external publications and working papers published on the Bank of Canada’s website.

This monthly newsletter features the latest research publications by Bank of Canada economists including external publications and working papers published on the Bank of Canada’s website.

This monthly newsletter features the latest research publications by Bank of Canada economists including external publications and working papers published on the Bank of Canada’s website.

The sharp depreciation of the Canadian dollar and the successful launch of the euro have sparked a lively debate in Canada about the possible benefits of formally adopting the U.S. dollar as our national currency. Some observers have suggested that this debate is largely irrelevant, since Canada is already highly "dollarized." Canadian businesses and households, they assert, often use the U.S. dollar to perform standard money functions in preference to their own currency. Very little evidence has been provided, however, to support these claims. The authors review the available data with a view to drawing some tentative conclusions about the extent to which Canada has already been informally dollarized. The evidence suggests that many of the concerns that have been expressed about the imminent demise of the Canadian dollar have been misplaced. The Canadian dollar continues to be used as the principal unit of account, medium of exchange, and store of value within our borders. Moreover, there is no indication that dollarization is likely to take hold in the foreseeable future. Indeed, in many respects, the Canadian economy is less dollarized now than it was 20 years ago.

This monthly newsletter features the latest research publications by Bank of Canada economists including external publications and working papers published on the Bank of Canada’s website.