Canadian Capital Confidence Barometer - April-October 2013
Rebound in global economic confidence
Overall economic confidence has improved significantly from October 2012. In total, 81% of Canadian respondents view the global economy as either stable or improving — up from October 2012 (36%) and April 2012 (75%).
Global economic sentiment has improved across most countries. The US — often an economic bellwether — has also seen a significant improvement in its perspective on the state of the global economy.
As for local sentiment, Canadian respondents continue to show increasing confidence in the local economy, even more so than their US counterparts, perhaps not surprisingly.
However, respondents in some of the world’s other mature economies are showing a lack of confidence in their own economies, which has likely had an adverse influence on capital investment and transaction activity.
Confidence spans leading economic indicators
Canadian respondents’ increased confidence spans several leading economic indicators. At 50%, positive sentiment toward global economic growth is at its highest level in two years. Confidence around credit availability has also increased significantly over the last six months, and confidence in short-term market stability has more than doubled. But while Canadian respondents were more positive around employment growth (44%) and corporate earnings (42%) than they were six months ago, US and global respondents were significantly more confident than Canadians in these two areas.
Please indicate your level of confidence in the following at the global level
These increasingly positive views, coupled with favourable sentiment about the regulatory environment for business growth, would normally signal an increase in both capital investment and M&A activity. However, confidence has not yet translated into action.
Low single-digit economic growth anticipated
In total, 77% of Canadian respondents expect to see growth in the global economy and 86% in the Canadian economy. However, most recognize growth is unlikely to reach the peaks last seen in 2006–07. The economic uncertainty that followed that period was so long and pervasive that typical cyclical behaviours have changed.
Global economic risks persist
Global market risks are well known by corporate boards. Slowing growth in emerging markets poses the most market risk to Canadian businesses and outweighs the US debt ceiling and eurozone challenges. While many companies have adjusted their strategies to compensate for these risks, others view them as a source of opportunity.
Job creation signals planned growth
Thirty-seven percent of Canadian respondents expect to hire talent or create jobs — an improvement from October 2012, but still behind US respondents. More encouragingly, plans for workforce reduction are at 13%, down from 20% six months ago — but again, this is behind US respondents, who indicate workforce reduction at only 6%, the lowest level in two years.