Business Confidence in Canada Drops on Weak Economy, Strong Canadian Dollar


Tuesday, May 4th, 2010

Although there has been a lot of positive talk on the Canadian economy, the ongoing weak economic conditions and the strength of the Canadian dollar has caused business confidence to drop in Canada for the second quarter.

Of particular note is the resistance of companies to invest because of the weak economic conditions, which continue to persist in spite of media reports to the contrary.

The fall in confidence wasn't huge, as it fell from 96.0 in the first quarter to 95.6 in the second, it is significant because Canada has seemed to be ready to go forward strongly, and it underscores even the commodity-rich country continues to struggle in the weak global economy.

What that means is businesses in Canada continue to run at lower capacity than normal, and until that changes, it is expected that confidence will remain lower.

In general companies are somewhat optimistic, but that seems more from a defensive position rather than one of expected or anticipated growth.

Until capacity increases, 22 percent of companies responding said they'll hold back on investing.

The other major factor is the strength of the Canadian dollar which continues to flirt with parity with the U.S. dollar. The stronger the Canadian dollar the less competitive exports to the U.S. are, which is the largest trading partner of Canada, and it also deeply affects the tourism industry in the country.



Article by Gary B

The views expressed are the subjective opinion of the article's author and not of FinancialAdvisory.com



Tags: business capacity , business confidence , canada business , canadian dollar

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