News Update

Energy costs erode bottom line amid corporate confidence decline

Corporate confidence in the Canadian economy is barely registering, with only six per cent of executives saying they are more confident than a year ago, according to respondents in the CICA/RBC Business Monitor report. As well, boardroom optimism about the economy has plunged to 23 per cent from 67 per cent over the past 12 months, based on the report’s quarterly survey of Chartered Accountants in executive corporate positions across Canada.

Rising energy prices are a major factor, and the number of survey respondents indicating that higher energy prices are of major, or moderate, importance to their company climbed significantly.

“A year ago, oil was selling for an average of $US 71.00 a barrel, gas prices at the pumps were averaging $1.07, and the Canadian dollar was perched at 94 cents US. It’s been a tumultuous 12 months and that is reflected in the drop in confidence and optimism levels of this latest report,” explains Shauneen Bruder, executive vice-president, RBC Business and Commercial Banking. “The good news for businesses in Canada is that we’re experiencing rising export prices coupled with strong domestic demand for goods and services. We also expect to see some positive effects from an improving U.S. economy by year’s end.”

The widespread impact of gasoline and diesel prices on companies right across Canada was evident in the fact that three-in-four respondents indicated their companies have had to absorb either some (49 per cent) or all (25 per cent) of rising energy costs. However, just under four-in-ten respondents in companies facing higher energy costs say they have made operational changes in response; these include changes in building operations, shipping/ logistics/vehicle usage and general cost reductions cited most frequently.

“With the upward trend in energy costs, sustained energy-cost management is a key focus for all companies,” said Kevin Dancey, FCA, CICA president and CEO. ”Well-run enterprises that both recognize the changing environment and control these expenses can achieve a competitive advantage.”