By Julie Gordon
OTTAWA (Reuters) - Business sentiment in Canada has turned slightly positive for the first time since the COVID-19 pandemic began, with the outlook bolstered by stronger foreign and domestic demand, according to a Bank of Canada survey.
The survey, conducted ahead of many tougher restrictions aimed at curbing surging COVID-19 infections, found that while half of businesses say their current sales are below pre-pandemic levels, most expect them to rise in the next 12 months.
"The Business Outlook Survey indicator continued to recover and turned slightly positive, signaling improved business sentiment," the Bank of Canada said in a report on Monday.
"Robust foreign demand, improved confidence related to vaccines, and ongoing government relief programs all contribute to the improved outlook."
The survey of around 100 firms was conducted between Nov. 16 and Dec. 4, prior to a number of Canadian provinces imposing stricter restrictions to contain the rapid spread of COVID-19 and before the vaccine rollout began.
While business sentiment strengthened overall, it remained solidly negative for many firms. Indeed, one-third of businesses - mainly those providing high-contact services - do not expect sales to return to pre-pandemic levels in the next 12 months.
Still, the investment and employment outlook improved from earlier surveys, with about half of firms now expecting to increase their workforce in 2021.
Inflation expectations, meanwhile, eased slightly, with the majority of firms expecting inflation to remain below 2% for the next two years.
The survey also found improved confidence on vaccine development, though most firms questioned did not anticipate positive impacts from vaccines to materialize until later in 2021.
The Canadian dollar was trading 0.9% lower at 1.2803 to the greenback, or 78.11 U.S. cents, as rising coronavirus cases globally weighed on investor sentiment.
(Additional reporting by David Ljunggren and Fergal Smith; Editing by Mark Heinrich)