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A job hire sign in the window of a telemarketing company, in downtown Thunder Bay.

Moe Doiron/The Globe and Mail

Sales and profits continue to rise but Canadian business leaders are surprisingly downbeat about the future.

Business confidence in the fourth quarter of 2012 suffered its largest drop in the 21/2 years that Deloitte Canada has been tracking the attitudes of Canadian chief financial officers.

Deloitte's "CFO Signals" index plunged to negative-6 in the fourth quarter from plus-47 in the third quarter, weighed down by uncertainty about U.S. fiscal woes and the European debt crisis. A negative reading means a majority of CFOs are less optimistic about their companies' prospects than they were in the third quarter of 2012.

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"It does appear to be a bit of a paradox," acknowledged Trevor Nakka, co-leader of Deloitte's CFO program.

"We've had a long period of decent corporate profits and sales growth ... but the sustained period of sluggishness – the sustained uncertainty – has weighed on confidence for so long that it's tipped to negative in Canada."

Mr. Nakka said Canadian CFOs have a lot to worry about, including a high dollar that is "here to stay," slowing growth in China, the proliferation of so-called "right-to-work" laws in American states and the worsening fiscal situation in Canada.

The result is that companies are cutting plans to hire new workers, invest in research and development, make capital expenditures and advertise, according to the survey of nearly 100 CFOs in Canada and the United States.

"For those wishing that the cash hoarding would end, the survey is showing that it's not necessarily going to change just yet," Mr. Nakka said. "There still is uncertainty."

Yet Canadian CFOs expect their own companies' sales to grow – by 5.5 per cent in the fourth quarter, down slightly from the 6.5 per cent they expected in the third quarter. And they expect profits to grow at an even quicker pace.

The leading economic concerns of Canadian CFOs centre around social policy, including spending on health care, education and infrastructure, according to the survey.

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American CFOs were equally glum in the survey. U.S. optimism fell to negative-21 in the final quarter of 2012 from negative-16 in the third quarter.

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About the Author
National Business Correspondent

Barrie McKenna is correspondent and columnist in The Globe and Mail's Ottawa bureau. From 1997 until 2010, he covered Washington from The Globe's bureau in the U.S. capital. During his U.S. posting, he traveled widely, filing stories from more than 30 states. Mr. McKenna has also been a frequent visitor to Japan and South Korea on reporting assignments. More

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