A wave of cautious optimism has swept through Canada's corner offices, despite signs that the economy's recovery is sputtering to a slow start.
The latest C-Suite survey of Canadian corporate executives, which was conducted in mid-September, shows a dramatic shift in attitudes in the past seven months. In the February survey almost 90 per cent of those polled thought the economy would shrink in the coming 12 months.
That has almost completely reversed, with 85 per cent now saying growth will occur in the next year.
Almost all of those who predict growth say it will be modest.Expectations of the U.S. economy have also shown a sharp turnaround. Now more than two-thirds of executives expect growth south of the border in the coming year. In February less than 5 per cent expressed that hope.
The optimism about the U.S. economy is at the highest level seen in the C-Suite survey in two years.
"We see growth in our supply chain," said Mike Barry, chief financial officer at Vecima Networks Inc., a Victoria-based company that makes telecommunications hardware and sells the bulk of its products into the United States. "What we notice the most is that our major customers are freeing up the capital dollars that they froze late last year or earlier this year. Now they are starting to release some of that again."
Still, Mr. Barry said, "for the economy as a whole it will be a bit of a bumpy ride."
Executives who responded to the C-Suite questionnaire said the key action that has helped return growth to the domestic economy was the Bank of Canada's low-interest-rate policy. About 87 per cent said that was an important move.
Federal stimulus money and federal infrastructure funds were also a help, more than three-quarters of the respondents said. The home renovation tax credit and the auto industry bailout got a much cooler response, and were deemed "important" by 68 per cent and 41 per cent, respectively.
Mr. Barry said Ottawa's actions - and those from other world governments - were most important for their symbolic nature rather than any actual assistance they gave companies. "Saying the words themselves … was enough to rebuild the confidence level of people."
Still, some executives are cautious about declaring the recession over.
"We've probably seen the worst of the downturn," said Leslie Herr, chief executive officer of Empire Life Insurance Co. But expansion is going to be slow, he added, and that may be a good thing over all.
"It has to be a more sensible level of growth than what we were seeing here, in the U.S. and around the world," he said.
"We saw an economy that was out of control because of the amount of credit that was available to people."
Governments, companies and individuals must learn to live within their means, Mr. Herr said. "We need to make sure we don't get back to this 'hyper-spend, I'll pay it back in 50 years' mentality."
The precarious state of the U.S. recovery is also a concern to many executives.
"Most of our business is in the United States and I think the U.S. is much worse off than Canada," said Bill Hammond, chief executive officer of Hammond Power Solutions Inc., a Guelph, Ont. company that makes transformers. "I don't see business picking up until the second half of next near in most of our markets."
In fact, some parts of the U.S. will not be back on track until 2011, he predicts.
While almost 40 per cent of the executives surveyed said access to credit has improved in the past three months, 18 per cent say credit conditions have worsened.