Canadian recession unlikely even with drop in economic optimism

But pessimism higher than previous quarter: Survey
||Last Updated: 11/04/2011

Despite increased pessimism about the Canadian economy among executive chartered accountants (CAs), only 27 per cent predict Canada will slip into a recession within the next six months, according to a survey released by the Canadian Institute of Chartered Accountants (CICA) and RBC.

But optimism about the national economy for the next 12 months is down sharply among respondents, falling to 16 per cent in the third quarter of 2011 compared with 43 per cent the previous quarter.

"It is too soon to tell if this sentiment is an emerging trend," said Kevin Dancey, president and CEO of the CICA. "While many executive CAs are expressing a more pessimistic viewpoint, the majority of respondents were actually neutral about the economy, with 57 per cent essentially taking a wait-and-see approach."

However, executive CAs are less optimistic about the United States, with 62 per cent saying the country is heading for a recession within the next six months. While 62 per cent of the 380 CAs surveyed believe their businesses are prepared for a recession in Canada, 71 per cent feel a U.S. recession would have a negative impact on their company. Fifty-seven per cent say the state of the American economy will represent the strongest challenge to the growth of the Canadian economy.

They are also less buoyant about how their own company will perform over the next 12 months when compared with the previous quarter. Business optimism now sits at 48 per cent — a 15-per-cent decline from the second quarter and an eight-per-cent drop compared to the third quarter of 2010.

While revenue, profit and employee number projections dipped in the third quarter, the forecasts for the next 12 months remain positive, found the CICA/RBC Business Monitor.

Forty-one per cent of respondents expect the number of employees to increase at their companies, down 10 per cent from the second quarter of 2011. Eighteen per cent expect to increase their employee count by five per cent or more, while 42 per cent of respondents do not anticipate any changes.

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