Canadian economic optimism drops based on U.S., European woes

BY KEN TYSIAC
August 24, 2012

Canadian accounting executives see problems outside their country as posing the greatest risk for growth inside Canada.

Thirty-seven percent of Canadian executive Chartered Accountants say the biggest hurdle for growth in Canada is the state of the U.S. economy, according to Canadian Institute of Chartered Accountants (CICA) Business Monitor survey for the second quarter, which was released Thursday.

The European debt crisis, named by 28% of survey respondents, was seen as the second biggest hurdle for Canadian growth.

“There is growing concern about the euro zone among the respondents,” CICA President and CEO Kevin Dancey said in a statement. “What impacts Europe, impacts the United States and impacts Canada. Apprehension is likely influencing the economic outlook of some of the business leaders surveyed.”

Although 62% of respondents remain neutral about the prospects for the Canadian economy over the next 12 months, optimism is falling. Nearly one-third (32%) of respondents reported optimism in the first quarter of the year; that number fell 11 percentage points in the second quarter to 21%. CAs’ optimism about their own companies also fell, from 57% in the first quarter to 49% in the second quarter.

Forecasts for success in the next 12 months in a number of key benchmarks decreased from the previous quarter, including:

Revenue: Sixty-one percent said their company’s revenue will increase in the next year, a decrease of six percentage points.

Profit: Those expecting their company’s profit to increase in the next year dropped to 55%, down from 65% in the first quarter.

Staffing: Respondents who expect their company to increase the number of employees in the next 12 months fell slightly, to 41% from 44% in the previous quarter.

“The fact that so many of those surveyed expect employment numbers to either increase or hold steady represents a silver lining among the findings,” Dancey said. “Optimism may be down but many Canadian companies appear poised to deal with possible economic turbulence over the coming months.”

The survey of 283 CAs in senior positions in public and private companies was conducted by email between June 19 and July 9.

Ken Tysiac ( ktysiac@aicpa.org ) is a JofA senior editor.

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