Peter Luit hopes he doesn’t have to cut his staff, or even stop hiring, but with the economic uncertainty and gyrating markets he’s not sure if he can avoid it.
“I certainly feel more nervous about things than I did several months ago,” said Mr. Luit, chief executive officer of Toronto-based customs broker Livingston International Inc. “I’m not panicking, but it is a cause for concern … you kind of have the hair trigger ready to do something if you need to.”
Mr. Luit said he and his team are carefully watching the economic signals, and weighing how deeply the economy is slipping. If things get bad Livingston – which is currently growing and adding staff – will put the brakes on hiring. And if the drop is precipitous – as bad as 2008-2009 – layoffs and shorter work hours will have to be considered.
As worry roils the global economy and stock markets bounce up and down wildly, Canadian executives like Mr. Luit are watching nervously, wondering if, and when, they will have to pull in their horns.
Many are not willing to cut back on investments or trim staff – at least not yet – but are preparing themselves in case conditions deteriorate. The discouraging environment is expected to prompt the Bank of Canada to leave interest rates at current levels at Wednesday’s setting, and perhaps for many months to come.
Montreal apparel maker Gildan Activewear Inc. last month revised its forecast for shipments to wholesalers from a 3-per-cent increase to a 5-per-cent decrease. The company is closely monitoring the situation but isn’t yet prepared to make another downward adjustment, said chief financial officer Laurence Sellyn.
Even the hot resource sector is being careful. Scott Saxberg, CEO of oil and gas producer Crescent Point Energy Corp., said that at current oil prices there is lots of flexibility to spend and grow. However, with uncertainty pervading global markets “we’re reviewing our budget right now for next year and planning for all the different scenarios. We have the ability to spend a lot more dollars with higher commodity prices, or pull back.”
The cautious approach has been building for months in corner suites across the country. The most recent survey of business confidence from the Conference Board of Canada, released early in August, showed a sharp dip in executive optimism for the second quarter in a row. And that was before the U.S. debt downgrade and the wild swings in markets that followed the deepening of Europe’s debt crisis.
Still, Conference Board director of national forecasts Pedro Antunes said the business confidence index was very high coming off the recession, so the downturn is not as worrying as it might have been in other circumstances. He also noted that the resource sector remains highly profitable and that “creates income throughout the economy and it trickles down through all sectors.”
Indeed, in the gold mining sector, the record price of the precious metal is a cause for celebration.
“To the extent the world around us is a bit stormy these days, people see gold as a safe haven, [and]that drives the price higher,” said Kinross Gold Corp. CEO Tye Burt. “There is a golden lining in every cloud, and the golden lining for our industry is that with higher prices come higher margins.” Kinross is on a hiring binge, adding 1,500 people this year.
However, Mr. Burt noted the company has to prepare for both up and down cycles for gold. “One’s individual corporate strategy can’t simply rely on commodity prices. It has to rely on the fundamental strategy of the business, which for us is to build high-quality mines.”
With files from Bertrand Marotte, Carrie Tait and Brenda Bouw