Royal Bank of Canada (RBC) economists Nathan Janzen and Abbey Xu note the Bank of Canada’s (BoC) Q2 Business Outlook Survey will show how firms reacted to recent energy price volatility, with West Texas Intermediate (WTI) previously near US$100. They expect inflation expectations to stay anchored near the 2% target and will watch sales, employment and investment intentions, which had improved in Q1, for confirmation of broadly steady business sentiment.

Survey to test sentiment and inflation

"The Q2 Business Outlook Survey will provide an early look at how business sentiment was impacted by the surge in energy prices in recent months."

"Survey responses were (at least initially) likely collected largely in May when oil prices were higher (West Texas Intermediate oil prices averaged just under US$100/barrel compared to under $70/bbl recently)."

"Results will still be reviewed for signs on whether inflation pressures broadened. But longer-term inflation expectations should remain well anchored as underlying pressures have continued to track close to the BoC's 2% target."

"Measures of expected future sales, employment, and business investment intentions will also be key after showing signs of improvement in the Q1."

"May trade data will also be released on Tuesday. We expect exports to rise 0.6%, slowing from 1.6% in April, while imports are expected to edge down 0.8%. Softer energy price growth in May should temper the energy trade balance, while softer motor vehicle shipments suggest some moderation in auto trade."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)