The softening U.S. economy will be felt heavily in Canada, according to a web poll of 137 Canadian business leaders conducted by COMPAS Inc. The poll indicates the respondents are more concerned than ever about the effects of a U.S. recession. Back in January, only 34% of CEOs believed a slowdown would have a “substantial impact.” Now that number is 54%, with 46% still maintaining the effect will be modest.
The next six months won’t be pretty. Slightly more than 60% of CEOs said the economic picture will become “somewhat worse” in the coming months, while 29% said it will remain about the same. They identified the declining U.S. dollar against the Euro as a serious indicator of trouble, as well as the weakening auto sector — particularly the news that Chrysler will shut down the entire company for two weeks this July (when it typically closes its assembly plants) as a cost-cutting measure.
The CEOs were somewhat favourable toward the actions of the Federal Reserve Bank of New York in its attempt to deal with some of the fallout from the current financial crisis. They awarded the Bank a score of 60 out of 100 for assuming a US$30-billion portfolio of assets from crippled investment bank Bear Stearns. Although the respondents believe the action was necessary to maintain the stability of the financial system, they also feel the bank should avoid setting a precedent of bailing out errant companies.
The worst is likely far from over, the respondents believe. Nearly all of the CEOs foresee more trouble for financial institutions, with 56% answering there is “probably” more fallout to come, and 39% answering “definitely.”