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Rising energy costs fuel meltdown in corporate confidence


Corporate confidence in the Canadian economy is barely registering, with only six per cent of executives saying they are more confident than a year ago, according to respondents in the CICA/RBC Business Monitor (Q2 2008) report released August 12. As well, boardroom optimism about the economy has plunged to 23 per cent from 67 per cent over the past 12 months, based on the report’s quarterly survey of Chartered Accountants in executive corporate positions across Canada.

Rising energy prices are a major factor, and the number of survey respondents indicating that higher energy prices are of major, or moderate, importance to their company climbed significantly (53 per cent vs. 39 per cent in Q2 2007).

“A year ago, oil was selling for an average of $US 71.00 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,” explains Shauneen Bruder, executive vice-president, RBC Business and Commercial Banking. “The good news for businesses in Canada is that we’re experiencing rising export prices coupled with strong domestic demand for goods and services. We also expect to see some positive effects from an improving U.S. economy by year’s end.”

The widespread impact of gasoline and diesel prices on companies right across Canada was evident in the fact that three-in-four respondents indicated their companies have had to absorb either some (49 per cent) or all (25 per cent) of rising energy costs. However, just under four- in-ten respondents in companies facing higher energy costs say they have made operational changes in response; these include changes in building operations, shipping/ logistics/vehicle usage and general cost reductions cited most frequently.

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

The CICA/RBC Business Monitor is issued quarterly, based on a survey conducted by The Canadian Institute of Chartered Accountants (CICA). The report draws upon business insights of CAs in leadership positions in privately and publicly held companies across Canada. For this Q2 2008 report, emailed surveys were completed by 443 CAs of 4,551 identified by CICA as holding senior positions (CFOs, CEOs and COOs) in publicly or privately held companies in Canada. The response rate was 11 per cent, with a margin of error associated with this type of study at 4.6 per cent, with a confidence level of 95 per cent.




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