Businesses’ economic optimism is sagging

After the rosy days of pandemic recovery, a CPA study finds execs are now far less hopeful about the rest of 2022.

Spiking inflation and supply chain issues are putting a dent in senior executives’ optimism.

According to the latest Business Monitor by the Chartered Professional Accountants of Canada (CPA Canada), optimism about the national economy over the next 12 months sank from 40% in Q1 to just 16% in Q2, with pessimism expressed by more than three times as many respondents (53%).

With support from NielsenIQ, from June 22 to July 7, CPA conducted email surveys on 412 of 5,830 people identified by the organization as holding senior positions in industry (CFOs, CEOs, COOs and other C-Suite roles) from a mix of SMBs and large companies.

The results of the survey reveal that business optimism shrank to 46% Q2, down from 64% in the opening quarter of the year, with fewer respondents reporting a positive outlook for revenues. Similarly, 45% thought profits would increase, compared with 63% the previous quarter, and 44% anticipated a climb in employee numbers, down from 56%.

Execs point to the rise in inflation as the primary challenge to economic growth, cited by 29% of those surveyed.

“Our results show that 70% of these business leaders say inflation is currently hurting their businesses and 44% expect that to continue for a year or more,”  David-Alexandre Brassard, CPA Canada’s chief economist.

This economic uncertainty is having an impact on marketing activities, with a spate of CPGs and other big ad spenders making changes in response. P&G and Nestle, for example, highlighted challenges stemming from “unprecedented” levels of inflation, hiking its prices and dialing back marketing spend in response. On the flip side, Unilever has instead boosted its marketing spend, an effort to keep cost-conscious customers from switching to lower-cost private label options.

Also, supply chain issues continuing to fluster execs, trailing at 14% and no other perceived challenges surpassing the ten per cent mark.