By Kim Mackrael

OTTAWA--Business sentiment in Canada improved in recent months as economic activity resumed, but the overall outlook remained relatively weak at the end of the summer, a Bank of Canada survey found.

The central bank's quarterly business outlook survey found many firms expected their sales would continue to rebound from the low levels recorded earlier this year, when government restrictions to contain the new coronavirus were first imposed. However, businesses added the pace of their recovery would likely slow compared with the summer months. Roughly one-third of businesses surveyed said it could take a year or more before their sales return to prepandemic levels.

"As in the summer survey, many firms referred to uncertainty about the return of containment measures and the unknown timing of a broadly available vaccine," the survey said. The Bank of Canada has previously said it expected the pace of Canada's recovery to slow over the autumn months, as pent-up demand from the spring was worked off.

Overall, the survey found firms' investment intentions remained weak and their hiring plans were still modest. Businesses' inflation expectations moved up from the low levels recorded in the summer, the central bank said, but remained in the lower half of the bank's 1% to 3% target range.

The Bank of Canada survey was conducted from late August to mid-September, before cases of Covid-19 began to rise sharply in some parts of the country. Canada's two most populous provinces, Quebec and Ontario, both tightened business restrictions in recent weeks to address a surge in new cases.

The seven-day average of reported Covid-19 cases in Canada more than tripled between early September and early October, according to data from Johns Hopkins University. Since then, the growth in reported cases has slowed but the seven-day average remains much higher than it was during the summer months.

A separate survey of consumer expectations, conducted by the Bank of Canada during the second half of August, found Canadians were still cautious about engaging in economic activity, but became more willing to do so compared with the spring.

The Bank of Canada's next interest-rate decision is due Oct. 28. The central bank has signaled it is unlikely to raise interest rates above 0.25%, which officials consider the lowest effective level, for at least two years.

Write to Kim Mackrael at kim.mackrael@wsj.com

(END) Dow Jones Newswires

October 19, 2020 11:03 ET (15:03 GMT)