UPDATE 1-Bank of Canada survey shows firms still weighed by cheaper oil

(Adds details on sales outlook, credit conditions, background)
OTTAWA, April 1 (Reuters) - Although Canadian business
sentiment improved in the first quarter, it remained subdued
overall as the positive effects from foreign demand were offset
by the drag of cheaper oil prices, the Bank of Canada said on
Friday.
There continued to be a sharp divergence of perspectives
between companies tied to the commodity sector and those that
benefit from exporting abroad, the central bank's quarterly
Business Outlook Survey found.
The overall balance of opinion on investment in machinery
and equipment pointed to modest increases in the next 12 months.
But firms tied to the energy sector and affected regions planned
to curtail investment spending, while companies exposed to
foreign markets intended to increase investment.
Employment intentions improved from the previous survey's
six-year low but remained below the historical average. The
survey reported more widespread hiring plans among non-commodity
exporters and companies in the service industries.
Sales volumes on the whole were expected to accelerate over
the next year but that positive balance of opinion was unchanged
from the previous two surveys. Although the results suggested
the pain from cheaper oil was starting to level off, some firms
expected declines in their future sales volumes.
Still, more than half of the firms said that demand from the
United States was lifting their sales outlook, with some
companies refocusing their efforts south of the border in light
of the depreciation of the Canadian dollar.
Businesses said credit conditions had tightened over the
past three months, with firms seeing an increase in borrowing
costs and a deterioration in their ability to issue new debt.
The reports of tighter conditions were concentrated among
firms with exposure to the energy sector, either directly or
indirectly. A separate survey of senior loan officers also found
that overall business lending conditions had continued to
tighten slightly in the first quarter.
The central bank cut interest rates twice last year to
combat the shock of the drop in oil prices. The economy was in a
brief recession last year but appears to have started 2016 on
stronger footing. The bank is widely expected to keep rates
steady when it meets later this month. ID:nL2N172248
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