2010 will exit like a lion, survey forecasts

January 26, 2010

Madhavi Acharya-Tom Yew

Financial executives are bullish about the coming economic recovery and expect their companies to perform well through the rest of this year, according to a new survey.

The survey of more than 200 senior decision-makers found that 60.4 per cent of executives expect the Canadian economy to return to normal growth in 2010, with the second half of the year likely to be better than the first.

One in four remains cautious, expecting the recovery in 2011, while 7.4 per cent saw 2012 as the year that growth returns.

Overall, nearly two-thirds, or 64.5 per cent of respondents expect their firm's revenues to increase through the year, while 61.9 per cent foresee higher sales volumes along with a hike in product prices.

It's a surprising level of optimism given the depth of the recession, said Ramona Dzinkowski, executive director of the Canadian Financial Executives Research Foundation.

"Despite a lot of mixed views and a rather bumpy ride in the last six months, our executives are rather bullish on the latter half of 2010."

Executives expect federal stimulus and low interest rates to drive the economy and they also see consumer demand strengthening on both sides of the border.

"With the return to economic prosperity in 2010, companies across the country are implementing a variety of strategies to ensure they are well positioned to capitalize on market opportunities," Dzinkowski said.

"Survey respondents said that growing revenue, improving customer service and increasing the efficiency of their supply chain top the list of corporate objectives."

While cost reduction remains an important factor to half of companies surveyed, only 13 per cent expect to slash their operations in 2010, with 30 per cent reporting that they may be increasing staffing levels.

"The view seems to be that the big downsizing has already occurred. With the focus on revenue growth and the fundamental feeling that consumers will drive the expansion going forward, they feel rather safe about increasing their capacity again, which means they have to hire new people," Dzinkowski said.

Roughly 70 per cent of respondents anticipate that inflation will be somewhat or very problematic by 2011.

The general worry is that inflation will choke off domestic demand.

The Canadian Financial Executives Research Foundation, the non-profit research arm of Financial Executives International Canada, conducted the survey.

It was sponsored by consulting and tax firm Ernst & Young.