UPDATE 1-Bank of Canada survey shows still-tepid business sentiment

(Adds business sentiment data, loan officer survey)
OTTAWA, Oct 9 (Reuters) - Overall business sentiment in
Canada remains tepid as firms adjust to a drop in commodity
prices and a weaker Canadian dollar that helps some and hurts
others, according to a Bank of Canada survey released on Friday.
The bank's quarterly business outlook survey showed
companies had experienced a flattening in sales growth over the
past 12 months. But forward-looking indicators of activity
improved, including expectations that sales will see some
acceleration over the next year.
Even there, however, companies' views diverged. Firms that
had restructured or refocused their efforts thought they were in
a better position to benefit from strengthening foreign demand,
but the outlook remained weak for firms in the energy sector and
supply chain, and those exposed to household spending.
The majority of companies especially in the manufacturing
sector, expect a boost to their sales from an improving U.S.
economy.
The Bank of Canada has cut interest rates twice this year to
help combat the effect of cheaper oil prices on the economy, but
it is widely expected to hold rates steady at its Oct. 21 policy
announcement.
The balance of opinion gauge on investment in machinery and
equipment rose, suggesting more widespread intentions to
increase spending in the coming 12 months. Intentions to
increase employment were positive but the balance of opinion
remained modest.
Companies across several industries said they saw benefits
from the weakening of the Canadian dollar over the past year.
Exporters were seeing higher margins on their U.S. sales, while
others were seeing increased business related to tourism.
But others said the weak domestic currency was a challenge
for them, particularly in the wholesale and retail trade sector.
Many had already passed the higher cost of inputs onto their
customers but said raising prices further would be detrimental
to their sales.
The survey found that credit conditions had tightened
somewhat over the past three months, particularly for those
exposed to the energy sector. A separate senior loan officer
survey released by the bank suggested business lending
conditions were largely unchanged in the third quarter.