Investors and the journalists who cover them spend a huge amount of time parsing reports on economic data that in many cases are out-of-date and misleading.
The Bank of Canada's quarterly survey of executives from across the country, due Monday morning, is different. While far from perfect (its sample is 100 or so firms), the poll offers the closest thing to a real-time snapshot of what a cross-section of companies are seeing on the ground day after day, and how that is shaping their decisions on hiring, investment and pricing.
That makes the Business Outlook Survey a crucial tool for the central bank as it assesses what do with interest rates in order to keep Canada's recovery on track without stoking inflationary pressures. Monday's version, though, will be watched more closely than any in a while because it comes as a range of uncertainties outside Canada's borders are coinciding with hotter-than-expected inflation at home.
Nobody expects that Bank of Canada Governor Mark Carney will lift borrowing costs in his July 19 decision, but the survey results will help determine the tone of a quarterly economic forecast that he'll publish on July 20, which could hint at how much longer he thinks he can stand pat.
Almost exactly a year ago, I wrote the following in a preview of the central bank's July, 2010, business outlook survey: ``As central banks and governments all over the world nervously wait to see if the drastic measures they took to nurse the global economy back to health will hold the recovery intact long enough for the private sector to take over, the U.S. bounce-back shows signs of faltering and the European debt crisis rattles financial markets.''
A year later, the U.S. labour market is backsliding (although survey respondents won't have seen last Friday's report on the dismal job numbers for June), the European debt crisis looks more ominous than ever, and the private sector is about to be the sole driver of growth in advanced economies as consumers and governments enter a long period of restraint.
The question is no longer whether the private sector will take over, but how boldly. The answer could well decide whether the soft patch in the global recovery gives way to a stronger rebound – as most, including Mr. Carney, predict it will – or degenerates into something worse.
We already know the strong Canadian dollar is still making life tough for exporters, at a time when Greece's woes threaten to ripple through the global banking system, Washington is mired in acrimonious debt squabbles of its own, and China, the engine of global growth since the downturn, is slowing as Beijing moves to cool inflation.
On Monday, we'll find out how much that swarm of worries is spooking the businesses that are being counted on to keep the rebound going.
On the flipside, we will learn whether inflation expectations or domestic capacity pressures are on the rise. Energy prices are already in retreat, as is wage growth, suggesting the surprisingly high inflation readings from May won't be repeated. But if enough companies believe their input costs are going to keep rising, and if enough feel they can safely pass those costs on to consumers, expectations can become reality – fast.
All told, Monday's report will carry more weight than usual.