Go to the Globe and Mail homepage

Jump to main navigationJump to main content

Report on Business

Economy Lab

Delving into the forces that shape our living standards
Best Business Blog, EPPY awards, 2011 and 2012

Entry archive:

Economy Lab has moved

Only Globe Unlimited members will now have access to a wide range of insightful commentary
and analysis on the economy and markets previously offered on this page.


Globe Unlimited subscribers will be able to read these columns,
written by some of Canada’s most deeply respected economists,
such as Christopher Ragan, Sheryl King, Andrew Jackson, and Clement Gignac,
as part of our ROB INSIGHT section.


All of our readers will still be able to browse the Economy Lab archives and read our
broader coverage of economic data and news by accessing their 10 free articles a month.


Learn more about Globe Unlimited and how to subscribe.

(CHRIS WATTIE/CHRIS WATTIE/REUTERS)
(CHRIS WATTIE/CHRIS WATTIE/REUTERS)

Economy Lab

Canadian executives' confidence wavers on mixed global picture Add to ...

Executives across the country are skeptical that they can maintain their current pace of sales as they brace for slower global demand.

Business confidence was more fragile at the end of 2011 than it had been in almost three years, according to a quarterly survey from the Bank of Canada, with 41 per cent of companies predicting their sales growth will slow over the next 12 months, compared with 37 per cent anticipating it will accelerate.

More related to this story

The weaker outlook for future sales, which even extended to resource-rich Western Canada where firms have benefited from overseas demand for commodities ranging from oil to potash, suggests the economy may slow more than expected this year. Already, most forecasters – including the central bank – see the economy growing no more than 2 per cent in 2012, as consumers focus on trimming their debt loads and governments cut spending and lay off workers to attack their budget deficits.

“The weak U.S. economic outlook, concerns about adverse effects from the situation in Europe and an expected slowing in household spending were among factors dampening sales prospects,” the central bank said. “Firms in Western Canada, notably those in the Prairies, expect sales growth to slow from the recent strong pace, while others continue to expect modest growth.”

Still, the uncertain climate is, generally, not spurring executives to cancel planned investments or pencil in job cuts.

Fifty-four per cent of firms in the survey said they plan to add staff over the next year, compared with 9 per cent which said they plan to lay off workers. The difference of plus-45 matched the second-highest reading for hiring intentions since 2005, although the central bank noted that this was driven by Western Canadian firms struggling to meet demand for commodities amid a shortage of skilled labour.

Also, as in the previous survey, about 40 per cent of executives said they plan to boost investment, taking advantage of the high dollar to buy state-of-the-art machinery that will replace decaying equipment and increase productivity. Plus, an ever-so-slightly higher number of firms said they would have trouble meeting a surprise jump in demand.

The survey results could have been worse, analysts said, given that the poll of about 100 firms was taken between mid-November and mid-December, a period that saw European debt problems worsen as the euro zone hurtled toward recession, and before the U.S. – Canada’s main export market – was showing steady hints of progress.

And after three months of disappointing employment reports from Statistics Canada that saw the unemployment rate rise to 7.5 per cent, it is possible to imagine better-than-expected job growth in 2012, even if it is concentrated in Western Canada, said Benjamin Reitzes, a senior economist at BMO Nesbitt Burns.

“Many firms are operating at complete capacity, and that’s going to keep them hiring, which should provide some assistance to the economy at a time when we’re going to be slowing down,” Mr. Reitzes said. “This may give us reason to be more optimistic on the jobs front.”

The investment picture is a bit more complicated if you look past the surface.

Volatility in financial markets and global economic uncertainty have led some executives to “curtail, or alter, their investment plans,” the survey found, even as Bank of Canada Governor Mark Carney urges companies to look past the U.S. and Europe and take bold steps to find new customers in emerging markets like China and Brazil.

Mr. Carney has argued that it is in businesses’ interests to do what they can now to position themselves in a global economic power structure that is increasingly shifting away from their traditional markets. But many are still too nervous about the immediate future to take risks like expanding their operations at home or moving into foreign countries.

“You want to have certainty – if you’re going to make investments and grow and pursue these new markets – that the markets you have will sustain,” said Craig McIntosh, chief executive officer of Acrylon Plastics Inc. in Winnipeg. “I still see a lot of people whispering that maybe there’s another recession around the corner.”

Mr. McIntosh’s staff of about 250 makes plastic parts for farm machinery, buses, windows and playgrounds, and while he remains worried about the U.S. economy, 35 per cent of his sales are still aimed at that market. He and many other executives, he said, are trying to avoid a repeat of 2008, when they were “flatfooted” by the swift, U.S.-led downturn, so they’re reluctant to cut too deeply into the piles of cash they’ve accumulated over three-plus years of caution.

“For me to say, ‘I want to expand and I want to go do some bold things,’ well, I’d love to see what I have today growing over top of 2008 levels, and that hasn’t happened,” he said.

Follow on Twitter: @jeremytorobin

In the know

Most popular video »

Highlights

More from The Globe and Mail

Most Popular Stories