High energy costs mean low business confidence

November 18, 2008
by PB2B Staff

Toronto—Corporate confidence in the Canadian economy is declining, in large part due to higher energy costs, according to the CICA/RBC second quarter Business Monitor.

Only six per cent of executives surveyed said they’re more confident than a year ago. Boardroom optimism about the economy has plunged to 23 per cent from 67 per cent over the past 12 months. The data was based on a quarterly survey of chartered accountants in executive positions across Canada.

The number of survey respondents indicating higher energy prices are of “major” or “moderate importance” to their companies climbed significantly to 53 per cent, from 39 per cent in the second quarter of 2007.

“A year ago, oil was selling for an average of US$ 71 a barrel, gas prices at the pumps were averaging $1.07, and the Canadian dollar was perched at 94 cents US. It’s been a tumultuous 12 months and that is reflected in the drop in confidence and optimism levels of this latest report,” said Shauneen Bruder, executive vice-president of RBC Business and Commercial Banking.

“The good news for businesses in Canada is that we’re expecting rising export prices coupled with strong domestic demand for goods and services. We also expect to see some positive effects from an improving US economy by year end.”

The report also included the following findings:

• Three out of four respondents said their companies have had to absorb either some or all of rising energy costs;
• Just under four in 10 respondents in companies facing higher energy costs said they’ve responded with operational changes, such as altering the way their buildings operate, shipping and logistics, and vehicle usage.

“With the upward trend in energy costs, sustained energy-cost management is a key focus for all companies,” said Kevin Dancey, president and CEO of CICA (Canadian Institute of Chartered Accountants). “Well-run enterprises that both recognize the changing environment and control these expenses can achieve competitive advantage.”

The survey involved 443 chartered accountants holding senior positions such as CFO, CEO and COO.