Skip to main content

The Globe and Mail

Canadian, U.S. CFOs grow glum on economic outlook

Canadian, U.S. CFOs grow glum on economic outlook

Moe Doiron/The Globe and Mail

Reversing a year of rising optimism, Canadian and U.S. chief financial officers are suddenly more downbeat on the prospects for the economy and their own companies, according to a quarterly survey by Deloitte being released Thursday.

Concerns about the global economy, including the euro debt crisis and falling stocks, are weighing on overall sentiment and prompting companies to "hunker down," Deloitte concluded, based on the survey conducted in the last two weeks of May.

The percentage of CFOs expressing optimism dropped to 39 per cent in the second quarter from 63 per cent in the first three months of the year.

Story continues below advertisement

"Companies are playing it a little more cautious and a little more conservative as they continue to watch and see what comes out of a world that remains volatile," Trevor Nakka, co-leader of Deloitte Canada's CFO program, said in an interview.

That's causing companies to ratchet back on capital expenditures, research and development, marketing as well and mergers-and-acquisitions.

Many CFOs also recognize they'll be hard-pressed to continue boosting profits through cost-cutting alone – the main source of profits since the recession.

"We're nearing a point where there are not as many gains that can be made," Mr. Nakka pointed out.

Canadian CFOs were significantly more optimistic about business conditions than their U.S. counterparts in the quarter – a pattern that has been consistent in the more than two years Deloitte has conducted the survey.

The persistent optimism gap is likely the result of Canada's faster pace of economic growth, lower unemployment and muted inflation, Mr. Nakka argued.

And yet Canadian CFOs are forecasting significantly lower sales and profit growth than U.S. CFOs. Canadians expect profits to grow 4.6 per cent this quarter, while Americans are forecasting gains of 12.3 per cent. It's a similar story on sales, with Canadians expecting a gain 5.9 per cent, compared to 6.7 per cent growth predicted by Americans.

Story continues below advertisement

"It does appear contradictory, Mr. Nakka acknowledged.

The more modest expectations north of the border may be due to Canada's heavy concentration of manufacturers and resource companies may explain, he suggested. These businesses are feeling the impact of the high Canadian dollar and a recent drop-off in commodity prices.

The top three challenges facing companies are growing or maintaining revenues, finding talent and prioritizing investments.

In spite of it all, CFOs in both countries expect to be able to raise prices, according to the survey, based on responses from nearly 100 CFOs of mainly large public companies; 19 from Canada.

Report an error Licensing Options
About the Author
National Business Correspondent

Barrie McKenna is correspondent and columnist in The Globe and Mail's Ottawa bureau. From 1997 until 2010, he covered Washington from The Globe's bureau in the U.S. capital. During his U.S. posting, he traveled widely, filing stories from more than 30 states. Mr. McKenna has also been a frequent visitor to Japan and South Korea on reporting assignments. More

Comments

The Globe invites you to share your views. Please stay on topic and be respectful to everyone. For more information on our commenting policies and how our community-based moderation works, please read our Community Guidelines and our Terms and Conditions.

We’ve made some technical updates to our commenting software. If you are experiencing any issues posting comments, simply log out and log back in.

Discussion loading… ✨

Combined Shape Created with Sketch.

Combined Shape Created with Sketch.

Thank you!

You are now subscribed to the newsletter at

You can unsubscribe from this newsletter or Globe promotions at any time by clicking the link at the bottom of the newsletter, or by emailing us at privacy@globeandmail.com.