T.E.C. (The Executive Committee) Ltd.

T.E.C. (The Executive Committee) Ltd.

September 13, 2005 10:00 ET

TEC International: Canadian CEOs' Confidence in Economy Falls for Second Consecutive Quarter; Rising Fuel Prices Pegged as Number One Economic Concern

CALGARY, ALBERTA--(CCNMatthews - Sept. 13, 2005) - Chief executives' confidence in the Canadian economy fell again this quarter to its second lowest level in the history of the TEC Confidence Index, according to a survey released today by TEC International, the world's largest membership organization of chief executives. This quarter's confidence level of 112.1 is only slightly higher that the record low level of 111.4, scored in Q3 of 2003, and is a full 14 percent lower than the index's record high reached this time last year.

Fuel prices are weighing heavily on the minds of Canada's chief executives, according to the index. As a result of current and anticipated gasoline costs, 38 percent of respondents are either facing or anticipating a direct significant impact on the way they conduct business. Higher fuel prices were identified by 43 percent of those who responded as their number one economic concern, a 17 percent increase from last quarter.

The Canadian dollar will continue its upward climb, according to 47 percent of Canadian CEOs. While this is good news for many Canadians, an even stronger loonie intensifies the crunch felt by a lot of the nation's CEOs in the manufacturing, exporting and tourism industries. Forty-four percent of respondents feel the loonie will remain about the same over the next 12 months, while only 9 percent anticipate it to weaken.

Staffing is a major hurdle for many of Canada's CEOs. Over the last three quarters, hiring and retaining trained, quality employees has been listed as the most significant business issue facing SME firms. And, when asked to identify significant factors impacting hiring over the last five months, 12 percent list oil and energy prices while 13 percent faulted the rise of the Canadian dollar. But, a lack of qualified candidates still tops the list for 37 percent of SME business leaders.

Nonetheless, the news isn't all bad for the Canadian job market. Seventy percent respondents are looking to increase their firms' total number of employees over the next 12 months, with the majority stating that they plan on steadily adding employees throughout this period.

Although the confidence level has dropped, the vast majority of Canadian SME CEOs maintain a cautiously optimistic outlook for the 12 months ahead. When asked if CEOs expect their firm's sales revenues to increase, 75 percent felt that they will, a drop of only three percent from last quarter. This confidence is also reflected in planned fixed investment expenditures and expected profitability, where 64 percent anticipate an improvement.

For over two years, the TEC Confidence Index has forecasted annual changes in the economy, including job creation and price increases. The quarterly survey continues to serve as an accurate snapshot of the economic landscape.

Over 100 CEOs of small to mid-size businesses took part in the survey and shared their views on current economic trends, issues affecting business and Canada as a whole.



TEC Confidence Index Component Questions
----------------------------------------

Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3
2003 2003 2004 2004 2004 2004 2005 2005 2005

Index Score: 111.3 123.1 117.7 124.6 126.1 115.3 116.2 112.4 112.1

Current
Economic
Conditions 83 125 116 155 137 145 125 117 125
Expected
Economic
Conditions 144 149 142 137 129 113 109 96 102
Planned Fixed
Investment 132 137 139 139 154 128 136 144 130
Planned Revenue
Growth 163 176 168 171 181 165 174 171 166
Expected Profit
Growth 153 166 153 160 166 156 156 155 146
Expected Change
in Employment 135 146 141 147 154 135 147 138 148

NOTE: All component questions are scored as the percent giving
favorable replies minus the percent unfavorable plus 100. The TEC
Confidence Index is the sum of the components calculated as a
percentage of the level recorded in the Q2 2003 survey.


ABOUT THE CANADIAN TEC CONFIDENCE INDEX

Canadian businesses with annual sales between $1 million and $1 billion represent the most vital component of the nation's economy. This small to mid-size business sector creates 75 percent of all new jobs and generates 50 percent of revenue. The opinions of these business leaders provide a clear snapshot of current economic, market, and industry trends and demonstrate their plans for growth over the next 12 months. These insights provide a leading indicator for employment, capital expenditure, sales, and revenue trends.

The Q3 2005 TEC Confidence Index is a compilation of responses from more than 100 Canadian CEOs of small to mid-sized companies, surveyed August 29 - September 7, 2005. The TEC Confidence Index is the only comprehensive report of their opinions and projections. TEC International, the world's largest membership of chief executives, conducts the TEC Confidence Index quarterly.

ABOUT TEC CANADA

T.E.C. (The Executive Committee) Ltd. is an international organization for chief executives (CEOs), managing directors, business owners and/or bottom line decision makers offering confidential business advisory sessions and professional support. TEC was established in Canada in 1985 and currently has over 620 members in 14 cities.

Members are placed in groups with non-competing peers to gain insights and learn from each other's business experiences. Each group is led in a one-day session by a TEC chair, a highly experienced business professional with specialized mentoring skills. The chair also holds one-to-one sessions with each member of the group to address individual needs. For more information, visit www.tec-canada.com or call (800) 661-9209.

ABOUT TEC INTERNATIONAL

TEC International, the world's largest membership of chief executives, helps companies solve business problems, achieve better results and outperform the competition. Since 1957, only TEC members have had access to a comprehensive suite of services that includes peer-group sessions, one-to-one executive coaching, best practices from recognized experts and the collective wisdom of more than 11,000 business leaders. TEC member companies grow, on average, at a rate 2.5 times faster than they did prior to joining. For more information, visit www.teconline.com.



TEC Confidence Index
Q3 2005

116 Respondents - 32% Response Rate
Margin of Error +/- 9.1%
August 29 - September 7, 2005


1. Compared with a year ago, have overall economic conditions in
Canada improved, remained the same, or worsened?

Response Total Response Percent
a. Improved 48 41%
b. About the same 49 42%
c. Worsened 19 16%
Total Respondents 116


2. During the next 12 months, do you expect the overall economic
conditions in Canada will be better, about the same, or worse than
now?

Response Total Response Percent
a. Better 32 28%
b. About the same 54 47%
c. Worse 30 26%
Total Respondents 116


3. Are your firm's total fixed investment expenditures likely to
increase, remain about the same, or decrease during the next 12
months?

Response Total Response Percent
a. Increase 54 47%
b. About the same 43 37%
c. Decrease 19 16%
Total Respondents 116


4. Do you anticipate that your firm's sales revenues will increase,
remain about the same, or decrease for the next 12 months?

Response Total Response Percent
a. Increase 87 75%
b. About the same 19 16%
c. Decrease 10 9%
Total Respondents 116


5. Do you expect your firm's profitability to improve, remain about
the same, or worsen during the next 12 months?

Response Total Response Percent
a. Improve 74 64%
b. About the same 21 18%
c. Worsen 21 18%
Total Respondents 116


6. Do you expect your firm's total number of employees will increase,
remain about the same, or decrease during the next 12 months?

Response Total Response Percent
a. Increase 69 59%
b. About the same 34 29%
c. Decrease 13 11%
Total Respondents 116


7. Do you expect the value of the Canadian dollar, compared with the
U.S. dollar, to be stronger, about the same, or weaker during the
next 12 months?

Response Total Response Percent
a. Stronger 55 47%
b. About the same 51 44%
c. Weaker 10 9%
Total Respondents 116


8. Do you expect prices for your product(s) or service(s) to increase,
remain about the same, or decrease during the next 12 months?

Response Total Response Percent
a. Increase 53 46%
b. About the same 48 41%
c. Decrease 13 11%
Total Respondents 114


9. When do you plan to increase your firm's total number of employees
over the next 12 months?

Response Total Response Percent
a. Q3 2005 4 3%
b. Q4 2005 9 8%
c. Q1 2006 17 15%
d. Q2 2006 16 14%
e. Steadily throughout the next
12 months 35 30%
f. I do not plan to increase my
total number of employees over
the next 12 months 35 30%
Total Respondents 116


10. Which of the following factors has had the most significant
impact on hiring in the last five months?

Response Total Response Percent
a. Oil/energy prices 14 12%
b. Healthcare costs 0 0%
c. Lack of qualified candidates 43 37%
d. Rise of the Canadian dollar 15 13%
e. Uncertainty of the growth rate
of the overall economy 7 6%
f. Offshoring (outsourcing outside
of Canada) 4 3%
g. None of the above has impacted
hiring in the last five months 21 18%
h. Other 12 10%
Total Respondents 112


11. What is the most significant business issue that you are
currently facing?

Response Total Response Percent
a. Cost of business (energy, raw
materials, healthcare/worker's
compensation) 12 10%
b. Staffing (hiring and retaining
trained, quality employees) 35 30%
c. Growth (concerns with increasing
growth, and growing too quickly) 17 15%
d. Financial issues (capital, cash
flow, profitability) 20 17%
e. Economic uncertainty (concern for
local and national economy,
increasing interest rates and
strength of Canadian dollar) 22 19%
f. Other 10 9%
Total Respondents 116


12. What concerns you most about the economy?

Response Total Response Percent
a. Rising interest rates 25 22%
b. Higher fuel prices 50 43%
c. Rising deficit 4 3%
d. Inflation 6 5%
e. No concern 9 8%
f. Other 21 18%
Total Respondents 115


13. During the next 12 months, do you expect the overall competitive
conditions for your industry to be better, about the same, or
worse than now?

Response Total Response Percent
a. Better 13 11%
b. About the same 67 58%
c. Worse than now 36 31%
Total Respondents 116


14. At what price will the cost of gasoline significantly impact how
you conduct business?

Response Total Response Percent
a. $1.00 per liter 14 12%
b. $1.15 per liter 16 14%
c. $1.30 per liter 10 9%
d. $1.45 per liter 4 3%
e. Don't know 43 37%
f. Will not be affected by
gasoline prices 29 25%
Total Respondents 116


15. Do you test your employees for drugs?

Response Total Response Percent
a. Yes, occasionally 8 7%
b. Yes, regularly 1 1%
c. No, but plan to start 3 3%
d. No 103 89%
Total Respondents 115


16. What is your number one source of capital for your business?

Response Total Response Percent
a. Business profits for reinvestment 64 55%
b. Venture capital 4 3%
c. Business line of credit 33 28%
d. Personal investment 8 7%
e. Line of credit from business
property 5 4%
f. Home equity line of credit 2 2%
Total Respondents 116


17. What impact would more stringent immigration laws have on your
business?

Response Total Response Percent
a. Strong positive impact 3 3%
b. Mild positive impact 7 6%
c. No impact 58 50%
d. Mild negative impact 38 33%
e. Strong negative impact 10 9%
Total Respondents 116


18. Do you have a formalized budgeting and planning process in place
for 2006? If no, skip to question 20?

Response Total Response Percent
a. Yes 102 88%
b. No 13 11%
Total Respondents 115


19. If yes, when do will you begin this budgeting / planning process?

Response Total Response Percent
a. Have already started 62 53%
b. September 17 15%
c. October 11 9%
d. November 5 4%
e. December 5 4%
Total Respondents 100


20. How much vacation time did you take this summer?

Response Total Response Percent
a. None 7 6%
b. Less than 5 days 18 16%
c. 5-10 days 36 31%
d. 10-15 days 27 23%
e. More than 15 days 28 24%
Total Respondents 116


NOTE: Two graphs are viewable on the CCNMatthews' website at the following link:

http://www2.ccnmatthews.com/database/fax/2000/tec913.pdf


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