CEOs’ confidence erodes amid concerns over environment, trade
TORONTO Broadsided by trade disputes, evolving technologies and environmental concerns, Canadian CEOs’ confidence in their own economy is eroding, according to a new survey.
Only 79 per cent of Canadian CEOs expressed confidence in the country’s economy, according to the latest KPMG Global CEO Survey, compared to 94 per cent in last year’s report.
By contrast, 83 per cent of the CEOs the management consultancy surveyed internationally were bullish on their local economies, a jump from the 74 per cent who were optimistic in the previous year.
“Canadian CEOs are actually still fairly bullish on our economy with eight out of 10 believing we’ll continue to see growth,” Benjie Thomas, Canadian managing partner of advisory services for KPMG in Canada, said in the report published Thursday. “But events over the past year have eroded their confidence somewhat.”
The study cites environmental risk, growing international trade frictions and emerging disruptive technologies posing real threats to continued growth.
“What is telling about these concerns is they all tend to be global issues rather than national ones — and they are the same top three risks identified by CEOs right across the globe,” Thomas said.
The Global CEO Outlook study polled 75 Canadian CEOs in a survey of 1,300 around the world. Two-fifths of the Canadian CEOs surveyed presided over annual revenues of between $1 billion and $9.99 billion. Banking, energy and asset management were the top three industries represented.
Peter Hughes, the digital services lead at KPMG and one of the authors of the study, said environment and technology were only the fifth and sixth biggest concerns respectively in last year’s study, but are garnering more attention from the CEOs. “(Innovation) happened in most developed countries at a certain pace, one that most companies have been able to deal with,” said Hughes. “What we’re seeing now with AI (artificial intelligence) and robotics, automation, cryptocurrencies, things like that is that there are exponentially more technologies coming at large corporations and I think the CEOs are starting to feel that.”
For environmental concerns, he cites oil prices, pipeline developments and the battle over carbon taxes as reasons for the increased economic uncertainty in Canada.
Hughes sees part of the decline as natural given the strength of last year’s numbers, yet the KPMG report also comes on the heels of another quarterly report from the Conference Board of Canada, an independent research organization, which predicted Canada’s real GDP to grow by a muted 1.4 per cent this year.
The Conference Board report, published Tuesday, forecasts a mild recession in Alberta due to oil uncertainty, while a trade dispute between Canada and China is expected to hurt the agriculture industry, with B.C. being hit hardest. It also shows financial austerity coming from Ontario’s latest provincial budget, while Quebec will remain sound and the Atlantic region will be on the upswing.
The Board expects Canada’s GDP to make a return to two-per-cent growth by 2020.
In both studies, the newfound economic uncertainty seems to come down to factors surrounding the top threats. For Hughes, the biggest surprise from the study was that only 44 per cent of Canadian CEOs plan to upscale their employees’ skills in the face of relentless innovation, compared to the U.S. and international numbers of 78 and 81 per cent respectively.
“I don’t think we lag because we’re already there,” said Hughes.
Marie-Christine Bernard, the director of provincial and territorial forecast services at the Conference Board, sees the need for improvements in exports, citing recent uncertainty over trade deals with the U.S., as well as investments, including and beyond the energy sector.
Seemingly, the only economic certainty is a cyberattack, with 60 per cent of Canadian CEOs telling KPMG it is a matter of “when, not if,” compared to 53 per cent globally. Only 59 per cent say they are well prepared for an attack, in contrast to a global figure of 69 per cent.
The KMPG and Board studies are in contrast to the Bank of Canada’s economic optimism, which earlier this week said that “continued strong job growth suggests that businesses see the weakness in the past two quarters as temporary.”
The bank maintained its interest rates on Wednesday, even as governor Stephen Poloz pointed to economic improvements.
Carolyn Wilkins, the bank’s senior deputy governor, echoed that sentiment in a speech in Calgary on Thursday, noting that “from a macro perspective, Canada’s economic performance has been relatively solid.”
Indeed, Canadian economic data has improved in recent months, with retail sales for March slightly beating estimates, wholesale trade climbing 1.4 per cent and beating expectations, and the labour market delivering a surprise earlier this month by adding 106,500 jobs — the biggest one-month employment gain since the government started collecting comparable data in 1976.
On Friday, Statistics Canada will release GDP data for the first quarter.
What is telling about these concerns is they all tend to be global issues rather than national ones ...