Thursday, August 11, 2011

Canadian business leaders losing confidence in markets

Even before this past week's global market meltdown, optimism among Canada's business leaders was dropping, according to a new poll.

The Conference Board of Canada's Index of Business Confidence slid to 103.7 in the second quarter, from 106.2 in the previous quarter, as expectations for the national economy "deteriorated sharply." The index stood at 109.5 just a few months ago in the fourth quarter of 2010.

Just 30% of executives polled said they believe that economic conditions will improve in the next six months, down from 40% in the first quarter. The number who said conditions will worsen rose four percentage points to 17%, despite solid corporate balance sheets and more businesses operating closer to capacity.

The share of respondents who are bracing for a drop in profitability fell more than 2% but those who expect it to improve fell by more - 12.6% to be exact. Some 44% expect flat profits in the coming months.

Likewise, the number of respondents who think now is a good time to make a major investment in their business fell to 55%, from 65% last quarter.

"This represents the largest one-period decrease since the financial crisis, but it is still well above the levels experienced during the recession," the Conference Board said.

Rising costs appear to be becoming more of a problem for business owners, as is a shortage of qualified workers.

More than twice as many bosses said the rising cost of capital goods is keeping them from make a new investment in their operations. Rising labour costs were also listed as an obstacle for 28.7% of respondents, up 10 percentage points from last period.

The number of bosses reporting weakening market demand also saw a 10% increase in the quarter.

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