For the first time since the fourth quarter of 2011, economic pessimism is running ahead of optimism in the CPA Canada Business Monitor.
The quarterly survey of professional accountants in leadership positions finds pessimism continuing its sharp upward climb. Thirty per cent of respondents surveyed in the first quarter of 2015 said they are pessimistic about how the Canadian economy will perform over the next 12 months. This is up from 19 per cent in the fourth quarter of 2014 and seven per cent in the third-quarter; and represents the highest level for economic pessimism since it was 30 per cent in Q2 2009.
As expected, with a jump in pessimism comes a drop in economic optimism. Just under a quarter (23 per cent) of survey respondents are optimistic about the prospects for the Canadian economy, down from 33 per cent in the final quarter of 2014 and 48 per cent in Q3. Forty-seven per cent of respondents were neutral in the first quarter of 2015.
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Oil prices were cited as the number one challenge to the Canadian economy in the survey.
"That is to be expected," says Kevin Dancey, president and CEO, Chartered Professional Accountants of Canada (CPA Canada). "Recent retail closings and lingering economic uncertainty, both at home and abroad, are other factors likely contributing to the surge in pessimism. It's also important to recognize that almost half of the respondents are taking a wait and see approach."
Only 29 per cent of the survey respondents felt that lower oil prices were beneficial to the country as a whole while 39 per cent believed the price levels benefited their own company.
As with the national economy, pessimism levels also climbed when survey participants were asked about the prospects of their own companies. Just over one in five (22 per cent), are expressing a pessimistic outlook for the next 12 months. Company pessimism has not been this high since the second quarter of 2009 when it stood at 25 per cent. Half of those participating in this latest survey like the prospects for their own company, similar to the previous quarter (53 per cent) but down from 62 per cent in the third quarter of 2014.
In terms of the biggest priorities for their companies, increasing sales within Canada was ranked highest by 21 per cent of respondents followed by reducing costs (15 per cent) and improving productivity (12 per cent).
With economic optimism falling, it is not a surprise to see a decline in the number of survey participants with positive projections relating to revenues and profits at their own companies.
Focusing on revenues, 59 per cent of the respondents are forecasting growth over the next 12 months, down from 65 per cent in Q4 2014. For profits, 54 per cent of those surveyed anticipate an increase compared with 62 per cent in the final quarter of 2014.
"The survey respondents obviously have concerns but the outlook is not all doom and gloom," explains Dancey. "There are still a significant number of respondents forecasting increases in revenues and profits."
Turning to employee numbers, 33 per cent of those surveyed are predicting growth at their company compared with 40 per cent the previous quarter. Forty one per cent of the respondents anticipate no change while 26 per cent expect a drop and the rest do not know.
The CPA Canada Business Monitor is issued quarterly, based on a survey commissioned by CPA Canada. The report draws upon business insights of professional accountants in leadership positions in privately and publicly held companies.
For the Q1 2015 study, emailed surveys were completed by 656 of 6,000 identified by CPA Canada as holding senior positions in industry (CFOs, CEOs, COOs and other leadership roles). The response rate was 11 per cent, with a margin of error associated with this type of study at ±3.8 per cent, with a confidence level of 95 per cent. The survey was conducted by Nielsen from March 31, 2014 to April 13, 2015.