Canadian businesses are shrugging off the recent credit turmoil and are confident the Canadian economy will remain strong, suggests a new survey released today by the Bank of Canada.

The central bank’s autumn survey of 100 businesses, conducted between August 16 and September 14, showed business leaders expect this past year’s strong domestic demand for their products will continue over the next 12 months.

Forty-five per cent of the firms said they intend to hire more workers to meet demand, as opposed to only 8% that expect to have fewer employees over the next year.

The percentage of firms reporting problems meeting unexpectedly high demand remains strong, with 54% having some or significant difficulty.

The tight market for workers was the most commonly reported restraint on growth, the firms said. In all, 41% of the firms said they face labour shortages.

“Western Canada is still the region most affected by capacity constraints,” the central bank said, “although pressures in the rest of the country have risen over the past two surveys.”

Overall, Canadian businesses expect their costs for materials and services to remain about the same as the past year, and 80% said inflation will continue to float between the Bank of Canada’s desired range of 1% to 3%.

Businesses also reported they have been affected by the credit crunch.

The balance of businesses expecting to invest more in the next year dropped to 6% in the survey, form over 20% in the previous quarter.

Part of this decline can be explained because many of firms have already completed large investments in machinery and equipment, but some attributed their increased caution to tighter credit conditions and high costs, primarily in Western Canada.