U.S. economy unlikely to slip into recession, but still seen as major economic challenge to Canada: CICA/RBC Business Monitor

TORONTO, April 3, 2012 /CNW/ - According to the latest CICA/RBC Business Monitor (Q1 2012), Canadian executive chartered accountants are more confident in the U.S. economy, with only 22 per cent believing that the U.S. will slip into a recession over the next six months, down 40 percentage points over the last two quarters.

In addition, optimism about the Canadian economy climbed sharply to 32 per cent in the first quarter of 2012, up from 20 per cent in Q4 2011.  Most of the respondents (58 per cent) remain neutral about the Canadian economy.  Of those expressing optimism, roughly three-quarters (74 per cent) cited interest rates as a reason for their optimism.

"It is not surprising that we're seeing a rise in optimism about the Canadian economy and greater comfort with indicators stateside considering how closely our economies are linked," said Kevin Dancey, president and CEO, Canadian Institute of Chartered Accountants.  "These are positive signals, but not enough to suggest that we have achieved a sustainable recovery in Canada."

Despite expressing increased confidence in the U.S. economy, 43 per cent of executive CAs view it as the biggest hurdle for growth in Canada and 63 per cent believe that a recession south of the border would have a negative impact on their company.  A much smaller percentage (18 per cent) see the economic crisis in Europe as the next biggest challenge to the growth of the Canadian economy.

The CICA/RBC Business Monitor also found that executive CAs are feeling good about the prospects for their own companies.  Company optimism rose to 57 per cent in Q1 up from 49 per cent in the last quarter of 2011.  The historical high for company optimism is 71 per cent.  There are also positive projections over the coming year for revenues and profits, and a significant number of respondents anticipate employment numbers to rise at their company.

"Governments are looking at businesses to lead a resurgence in economic growth," says Andrea Bolger, head, Business Financial Services, RBC. "So it's very encouraging to hear that Canadian business leaders are optimistic, and that they're moving forward with an expectation that their performance will be stronger over the next 12 months, despite the challenging and uncertain economy."

Key highlights:  Revenues, profits and employee numbers

Revenues
Sixty-seven per cent of executive CAs say their revenues will increase in the next year, virtually unchanged from last quarter (68 per cent).  Two-in-ten (20 per cent) expect to increase revenues by more than ten per cent.

Profits
Sixty-five per cent of respondents expect that their profits will increase in the next year, up from 60 per cent last quarter. Almost a quarter (23 per cent) expect an increase in profits of more than ten per cent.

Employee numbers
Forty-four per cent of respondents expect the number of employees at their firms will increase in the next year, virtually unchanged compared to last quarter (42 per cent).  Twenty-five per cent of respondents expect employment numbers to increase by less than five per cent.  Four-in-ten (41 per cent) do not anticipate any changes in employment numbers at their company; eight per cent anticipate employment numbers to jump by more than ten per cent.

The CICA/RBC Business Monitor is issued quarterly, based on a survey commissioned by the CICA. The report draws upon business insights of CAs in leadership positions in privately and publicly held companies across Canada.

For the Q1 2012 study, emailed surveys were completed by 320 CAs of 4,373 identified by the CICA as holding senior positions (CFOs, CEOs and COOs). The response rate was 7.3 per cent, with a margin of error associated with this type of study at ±5.5 per cent, with a confidence level of 95 per cent. The survey was conducted by Harris/Decima from January 31^st to February 16^th, 2012.  A background document is available online at www.cicarbcbusinessmonitor.com.

About CICA
Chartered Accountants (CAs) are Canada's most valued, internationally recognized profession of leaders in senior management, advisory, financial, tax and assurance roles. Through their integrity, expertise, and internationally recognized qualification standards, Canada's 80,000 CAs sustain their influence and leadership position both in Canada and globally. As trusted business advisors to Canadian organizations of all sizes, Canada's CAs foster confidence in Canadian business and contribute to the health and sustainability of Canada's capital markets and economy. The Canadian Institute of Chartered Accountants (CICA) represents Canada's CA profession both nationally and internationally. The CICA is a founding member of the International Federation of Accountants (IFAC) and the Global Accounting Alliance (GAA).

About RBC
RBC delivers a wide range of financial services through a variety of channels to individuals, small and medium-sized businesses and commercial clients, including deposit accounts, investments and mutual funds, credit and debit cards, business and personal loans, and residential and commercial mortgages. It is the personal and commercial banking division of Royal Bank of Canada (RY on TSX and NYSE).

For further information:

Interviews with an official from the CICA can be arranged by contacting:
Tobin Lambie, CICA, [phone] or [email protected]

Interviews can be arranged with an official from RBC by contacting:
Kathy Bevan, RBC, [phone] or [email protected]
Caitlin Holwell, RBC, [phone] or [email protected]