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An oil field worker walks up a flight of stairs near wellheads that inject steam into the ground and pump oil out at the Cenovus Energy Christina Lake Steam-Assisted Gravity Drainage (SAGD) project near Fort McMurray, Alta., in this file photo.

© Todd Korol / Reuters

A growing proportion of Canadian executives think the economy is in trouble, but they are torn over what a new government should do about it after the federal election.

The latest quarterly C-Suite survey shows that corporate executives are more discouraged about the economic outlook than they have been since the midst of the recession seven years ago. More than half think the economy will decline in the next year, the first time since November, 2008, that a majority have felt that way.

Just three months earlier, two-thirds thought the Canadian economy was bound for expansion.

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But the executive suite is split on what the federal government needs to do to get the economic wheels back in motion. Forty-six per cent want stimulus, while 48 per cent say Ottawa should focus on restraining spending to ensure a balanced budget.

Those two opposing views are increasingly coming into focus in the election campaign as the Liberals promise spending on infrastructure – and a few years of deficits – while the New Democratic Party and Conservatives vow to keep the budget balanced.

"My view is to stay with restraint and let the economy take care of itself," said Paul Baay, chief executive officer of Touchstone Exploration Inc., an oil and gas firm based in Calgary. "Any time the government gets involved, it tends to swing the pendulum too far one way or the other."

It is too early for the low Canadian dollar to have generated many gains in manufacturing, but "those are around the corner," Mr. Baay said. "Sitting in my corner office in downtown Calgary, it feels like doom and gloom, but you don't have to travel very far to Vancouver or Toronto, and there seems to be a fairly positive feel, that there are a lot of things going on outside the energy sector."

Indeed, the C-Suite survey shows a sharp geographical divide, with almost 70 per cent of executives based in Alberta saying they believe the economy is currently in a recession, while just more than 40 per cent of those based in the rest of the country think that's the case.

Mr. Baay said he fully supported the government's intervention to stimulate the economy in 2008 and 2009, because that was a much broader downturn, but now the problem is a commodity issue "and I'm not sure the government can fight commodities."

John Simmons, CEO of solar lighting firm Carmanah Technologies Corp. in Victoria, said he is concerned that deficit spending, when combined with the loss of energy revenue, could "dig quite a hole" in public finances that will be tough to reverse.

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He said he is okay with "modest deficits from time to time" if they are matched with the same number of surpluses, but that scenario doesn't seem to happen very often.

On the other side of the debate, Capstone Infrastructure Corp. CEO Michael Bernstein said he is in favour of deficit spending, as long as it pumps money into projects that increase productivity or provide a long-term benefit to society.

These projects should have a long-term payback, he said, and could include transit infrastructure, for example, or educational research facilities.

Still, he said, this would not mean the same kind of deep deficit spending that was necessary in 2007 and 2008, when "you had a patient having a heart attack and you had to give it a jolt."

In contrast to the C-suite's generally discouraging view of the Canadian economy, a large majority of executives think the U.S. economy is set for a year of expansion. More than 90-per-cent predict growth south of the border in the next 12 months.

Despite Prime Minister Stephen Harper's claims that only the oil patch is in recession, a majority of Canadian executives – 56 per cent – say the contraction is not exclusively in the energy sector.

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"We're spluttering along. We are not in great shape," said Rupert Duchesne, group chief executive of Montreal-based Aimia Inc., the company that runs the Aeroplan points system and other international loyalty programs.

Mr. Duchesne said his firm deals mainly with relatively well-off households all across the country, and "they appear to have pulled their horns in." That suggests the overall economy "has caught a confidence cold," he said, and has declined "compared to what it was a year or two ago."

Mr. Duchesne said he is in the group that feels the economy does need some stimulus, especially in areas that create and sustain employment. That would include infrastructure projects and aid for industrial development. Moderate deficits that might be generated by putting money into "deep stimulus" should not be a problem for the country, he said.

Whatever party wins the election, he added, "we've got to put aside some of the ideology and really think about how to get the country back on its feet."

Willy Kruh, global chair of consumer markets at auditor and tax consultants KPMG, said the divide among executives when it comes to stimulus versus restraint is a reflection of confusion about the state of the economy. What they are seeing "is some smattering of good news among the doom and gloom," he said.

Some executives who believe in restraint may also have been influenced by years of deficits where they felt the money was not spent wisely, Mr. Kruh said. If they had a better idea of where the funds would go, there might be greater support for deficit spending, he said.

About the survey

The quarterly C-Suite survey was conducted for Report on Business and Business News Network by the Gandalf Group, and sponsored by KPMG. The survey interviewed 152 executives between Aug. 24 and Sept. 18, 2015.

Respondents represent ROB 1,000 companies from across Canada in the manufacturing, service and resource sectors.

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