May 2010 6

Business Confidence in Canada Stalls

Posted by
Fly by Cia Gould
Canadian businesses
are gaining confidence
photo by Cia Gould

Canadian businesses are gaining confidence that the economic recovery is real, but they remain concerned that they?re not seeing the results in their individual operations. A new survey by the Conference Board of Canada shows that business confidence, rather than rising with the country?s economic growth, has stalled over the past six months.

The fall in confidence wasn?t huge, as it only fell from 96.0 in the first quarter to 95.6 in the second. Nevertheless, it is significant because Canada has seemed to be ready to go forward strongly and shows that even a commodity-rich country can continue to struggle in the weak global economy.

Canada?s economy grew by a surprisingly strong 5% in the last three months of 2009, and is believed to have recorded the biggest quarterly gain in a decade during the first three months of this year.

The main worry for companies was poor capacity utilization rates, with sentiment on this issue worsening from the first quarter and with 22 percent of respondents saying it could affect their willingness to invest.

In general, companies are somewhat optimistic, but that more from the defensive position rather than one of expected or anticipated growth. The survey shows businesses are generally more confident about their financial positions and the economy as whole. But they also were worried about the strong Canadian dollar, which tends to bring down profits from exports of goods and services produced in this country.

There was some good news in the survey, especially when compared with the dreary results obtained a year ago when the economy was in freefall. While at this time last year less than a third said it was a good time to make capital investments and nearly 50% said it was a bad time, in this survey nearly 60% said they planned to boost expenditures and just 16.1% planned to reduce capital investment in the next six months.

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