Trade Surplus BDO Dunwoody/Chamber Weekly CEO/Business Leader Poll by COMPAS in the Financial Post for Publication January 24, 2005 COMPAS Inc. Public Opinion and Customer Research January 24, 2005
1.0 Introduction The point of departure for this week s web-survey of the panel of business leaders and CEOs was a recent Statistics Canada report on trade figures for November 2004, which show a small decrease in exports and a substantial decrease in imports resulting in a record trade surplus. Panelists are bullish about the present state of the Canadian economy. Reports of capital spending revisions by their own organizations are broadly consistent with their own bullishness. They nonetheless forecast some leveling off of the Canadian economy by mid-2005 in part because of some perceptions that the high loonie may harm exports. Not all members of the panel are convinced that exports will be harmed by the higher Canadian dollar. There emerges no consensus of opinion on how to interpret Statistics Canada figures pointing to a decline in imports. These are the key findings of the weekly on-line survey of CEOs and business leaders for publication in the National Post under the sponsorship of BDO Dunwoody LLP and the Canadian Chamber of Commerce. 2.0 High Loonie Some Perceptions of a Negative Impact on Exports, Divided Opinion about Imports A large plurality of the business panel forecast that the high Canadian dollar will impact negatively on exports but such concern is far from unanimous. While 45 of respondents predict that exports will decline as a result of the favourable exchange rate, 31 believe that our efficiency and productivity are sufficient for exports to withstand a strong dollar, as shown in table 2.2. The panel of CEOs and business leaders is not convinced that recent Statistics Canada figures pointing to a small decrease in exports in November is entirely the result of a strengthening Canadian dollar. As one respondent put it, 2
A back log at major ports could partially account for lower than expected import figures. While optimistic about the resilience of exports in the face of the rising dollar, panelists do nonetheless perceive some indications of an abatement of exports in their particular industry, as shown in table 2.2. In practice, 11 of respondents report perceptions that exports in their sector have been rising in the past six months while 43 report perceptions of a decline. While the panel is inclined on balance to perceive a threat to exports from a strong loonie, no strong opinion emerges with respect to the direction of imports. Asked to explain Statistics Canada trade figures showing a substantial decrease in imports, CEOs and business leaders offer a diversity of explanations including the possibility that such import figures are merely a statistical anomaly, as shown in table 2.3. As for their own particular sectors or industries, panelists do not perceive imports as having fallen, as shown in table 2.4. Table 2.1: (Q2A) Recent Statistics Canada trade figures for November 2004 show a small decrease in exports and a substantial decrease in imports resulting in a record trade surplus. With respect to the small decrease in exports, which of the following opinions is closest to your own? [RANDOMIZE] Exports will decrease more substantially as a result of the high dollar 45 It shows that exports can withstand a stronger dollar 31 It s an indication that our economy is strong and productive 9 These stats are misleading 6 Other 5 DNK/ Refused 3 3
Table 2.2: (Q1A) There s been some talk in the media about the potential impact of the current value of the dollar on trade. Thinking of your industry and the businesses you know, so far as you can tell in the past six months has exporting [ROTATE POLES] Gone up a lot 1 Gone up somewhat 10 Remained about the same 35 Gone down a little 34 Gone down a lot 9 DNK/ Refused 11 Table 2.3: (Q2B) Recent Statistics Canada trade figures for November 2004 show a small decrease in exports and a substantial decrease in imports resulting in a record trade surplus. With respect to the substantial decrease in imports, which of the following opinions is closest to your own? [RANDOMIZE] It indicates that Canadian suppliers are providing quality substitutes for imports 29 It s an anomaly 28 It s an indication that our economy may be heading into a recession 15 These stats are misleading 13 Other 7 DNK/ Refused 9 4
Table 2.4: (Q1B) There s been some talk in the media about the potential impact of the current value of the dollar on trade. Thinking of your industry and the businesses you know, so far as you can tell in the past six months has importing [ROTATE POLES] Gone up a lot 3 Gone up somewhat 24 Remained about the same 49 Gone down a little 10 Gone down a lot 3 DNK/ Refused 11 3.0 Perceptions of an Economy That Is Peaking Members of the panel express more confidence about the state of the current Canadian economy than they have in the last three years but they are not immensely optimistic six months hence. A record number characterize the present economy as good or excellent (77) vs. a low of 49 in August 2003, as shown in table 3.1. But panelists are not immensely bullish about the economy in mid-2005. Only 21 foresee its being better compared to 25 worse, as shown in table 3.2. Table 3.1: (Q3) Generally speaking, how would you describe Canada's economy today? Would you say it is at this time? [ROTATE POLES] Jan. 2005 Aug 2003 June 2003 Dec. 2002 June 2002 5
Excellent 5 1 3 5 8 Good 72 48 60 61 65 Only fair 23 48 34 32 23 Poor 1 4 3 2 3 DNK/Refused 0 0 0 0 1 Table 3.2: (Q4) And how do you think the Canadian economy will be in six months? Will it get [ROTATE POLES] Jan. 2005 Aug. 2003 June 2003 A lot better 2 2 1 Somewhat better 19 37 29 Remain about the same 54 49 46 Somewhat worse 24 11 22 A lot worse 1 1 1 DNK/REF 0 0 1 With respect to the capital spending plans of their own organizations, panellists report some degree of stability with 23 observing upward revisions and 20, downwards, as shown in table 3.3. Previously reported capital spending revisions tended to be downward revisions, for example, 21 upwards in December, 2003 vs. 29 downwards. Table 3.3: (Q5) In the last 10 weeks, has the 12-month capital-spending plan of your firm or organization been revised [ROTATE POLES] Jan. 2005 Dec. 2003 Feb.2002 Nov. 2001 Upwards a lot 2 3 2 1 Upwards somewhat 21 18 16 13 6
Not changed 54 44 50 43 Downwards somewhat 15 23 19 31 Downwards a lot 5 6 6 6 DNK/ Refused 4 7 6 6 4.0 Methodology The National Post/COMPAS web-survey of CEOs and leaders of small, medium, and large corporations and among executives of the local and national Chambers of Commerce was conducted January 18-21, 2005. Respondents constitute an essentially hand-picked panel with a higher numerical representation of small and medium-sized firms. Because of the small population of CEOs and business leaders from which the sample was drawn, the study can be considered more accurate than comparably sized general public studies. In studies of the general public, surveys of 151 are deemed accurate to within approximately 8.0 percentage points 19 times out of 20. The principal and co-investigator on this study are Conrad Winn, Ph.D and Tamara Gottlieb. 7