Business sentiment still cool: Conference Board of Canada

Business confidence has been in a prolonged slump that shows no signs of clearing, survey suggests

Mario Toneguzzi is a Troy Media reporter based in CalgaryBusiness sentiment in Canada remains in its long slump, according to a report by the Conference Board of Canada.

The results of board’s latest survey of business leaders show that businesses remain deeply pessimistic about the economy. The Index of Business Confidence fell by 1.5 points to 86.0 in the third quarter of 2019. The index has been stuck at a depressed level for a year, and is well down from its level of 100 in the last quarter of 2017.

The index summarizes the views of business executives in Canada on the state of the economy and is a leading indicator of business investment. The survey was conducted between Aug. 15 and Oct. 31, 2019, said the board.

“Business sentiment declined steeply in 2018 and has been languishing at a low level throughout this year. While businesses were a bit more pessimistic this quarter, the key take-away is that business confidence has been in a prolonged slump that shows no signs of clearing,” said Robyn Gibbard, an economist responsible for national forecast for the conference board.

“Canadian businesses face some real challenges. Despite Canada’s having reached a new trade deal with our largest trading partners, the new Canada-United States-Mexico (CUSMA) trade agreement has still not been ratified. This lack of ratification makes exporters nervous about making major investments in Canada. Additionally, major U.S. tax cuts passed in 2017 have undercut us and made Canadian business tax rates non-competitive. The lack of trade certainty and the more favourable tax regime in the United States mean that, for businesses able to choose which country to invest in, it is difficult to justify investing in Canada.

“When businesses face these kinds of headwinds and are cynical about the future, we have traditionally seen less investment in machinery and equipment. This has a lasting impact on potential economic growth. The last time we had a positive balance of opinion on economic conditions was eight quarters ago.”

In the survey, 42 per cent of respondents said they expect economic conditions to worsen in six months while just nine per cent believed economic conditions will improve.

When asked about their own firms, 34 per cent said they expect their firm’s financial position to improve in the next six months. More than half of respondents said they expected their firm’s financial position to deteriorate.

Mario Toneguzzi is a business reporter in Calgary.

© Calgary’s Business


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