Despite glimmers of hope on the horizon, Canadian financial executives are bracing for another year of global economic turmoil.
Deloitte's fourth-quarter survey of North American CFOs suggests that more companies will control spending in 2013 with notable slowing in capital investment, research and development and employment.
Most survey respondents expected capital spending to remain flat this year, down from a high of a 10% increase in capital expenditure in 2012's second quarter. The expected growth in R&D spending fell to 2.7% from a high of 5.4% in 2011's fourth quarter.
Eddie Leschiutta, a partner at Deloitte, noted that the declines are more pronounced among Canadian CFOs, who have become increasingly pessimistic recently because of persistent crises in the largest global economies.
"The Eurozone's issues continue. The U.S., which has been Canada's largest trading partner for the longest time, went through a difficult time with the fiscal cliff, but they still have challenges in front of them.
"They still have to get their spending in check, and they've also got the debt ceiling to deal with. So it's wearing down CFOs as time goes on."
Despite their growing pessimism, CFOs are relatively optimistic about their companies' prospects.
Respondents expected sales and earnings to rise 5.6% and 10.9%, respectively, on average in 2013. Canadian companies exporting to the U.S. should have more reason to be optimistic than their counterparts selling domestically. BMO's latest forecast has the U.S. economy growing 2.4% compared with 1.7% growth in Canada in 2013.
Leschiutta suggested that CFO expectations of relatively slow growth are because most companies aren't looking to expand into new markets or launch new products until a clearer and more positive economic picture emerges globally.
"The way we're reading this is they're going to wait and see until they know the economy is generally stronger. Once they know, they have an opportunity to expand into new markets and hire new people. Until then, they're going to keep the status quo."
