By Promit Mukherjee and David Ljunggren
OTTAWA, April 20 (Reuters) - Canadian business sentiment had started to rise before the Iran war, a Bank of Canada survey showed on Monday, but a smaller sample of firms exposed to the conflict later indicated many expected higher input prices.
The quarterly survey was conducted across 100 firms between February 5 and 25. The war started on February 28, prompting the bank to carry out a March survey of 20 firms it thought were likely to be directly affected.
"Most businesses had revised up their expectations for input prices, mentioning specifically fuel, freight, fertilizers and exchange rates," it said.
Firms with fuel-intensive operations, such as agriculture, oil and gas, manufacturing and transportation, have already reported increases in input costs. Others expect increases in coming months as costs are passed on by suppliers.
Bank of Canada Governor Tiff Macklem said last week that he was not concerned about the near-term spike in inflation expectations due to the war.
The business outlook indicator, a metric of prospects under current economic conditions, rose to -0.36, the highest since the fourth quarter of 2022.
The survey results are closely tracked by the BoC and economists to gauge the trend of inflation and recession. Money markets are betting one 25 basis point hike later this year.
The survey showed trade tensions between Canada and the U.S., which had been fanned by tariffs, are weighing less heavily and future sales outlooks have returned to their historical average.
"More firms than in recent quarters are focusing investments on increasing productivity and expanding their capacity, while fewer are focusing on routine maintenance," the survey said, adding nearly half of the firms anticipate hiring more staff over the next year.
A separate survey of consumers showed their expectations for a five-year inflation had fallen to 3.02% from 3.09% in the fourth quarter.
(Reuters Ottawa editorial)
Keywords: CANADA CENBANK/
