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

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

June 14, 2005 10:00 ET

TEC International: Canadian CEOs' Confidence in the Growth of the Nation's Economy Falls to Lowest Level Since Q3 2003

CALGARY, ALBERTA--(CCNMatthews - June 14, 2005) - Chief executives' confidence in the Canadian economy fell for the second time in nine months reaching its lowest level since Q3 of 2003, according to a survey released today by TEC International, the world's largest membership organization of chief executives. This quarter's confidence level of 112.4 is down 3.8 percent from last quarter and is only slightly higher then Q3's 2003 record low of 111.3.

Canada's government is taking a lot of the blame for the nation's economic outlook, according to 63 percent of respondents who see the current minority government as having a negative effect on Canada's economic performance. Additionally, 66 percent of chief executives, who participated in the survey, feel that the current minority government can't effectively lead the nation.

The crunch felt by the manufacturing, exporting and tourism industries, resulting from a strong Canadian dollar, doesn't look like it will end any time soon. Forty-seven percent of those surveyed are expecting the loonie to stay at about the same level over the next 12 months, while 38 percent expect it to strengthen.

CEOs are also feeling a financial pinch, according to this quarter's survey. Seventy-three percent of respondents stated that their overall costs from their suppliers have increased in the last 12 months and cite higher fuel prices and rising interest rates as their two main economic concerns. When asked what measures they have taken to offset the rising cost of energy 55 percent said they've absorbed the increase, while 31 percent have increased their prices. Additionally, when asked if they expect to increase prices for their products or services during the next 12 months, 39 percent said they will.

Over the last two quarters, hiring and retaining trained, quality employees has been listed as the most significant business issue facing SME firms, and a lack of qualified candidates as having the most significant impact on their hiring plans. However, 49 percent of CEOs surveyed still expect to increase their total employee numbers. Thirty-one percent of those expecting to hire, plan on steadily adding employees throughout 2005 and the first quarter of 2006.

Although 81 percent of CEOs expect overall economic conditions in Canada will be about the same or worse during the next 12 months, CEOs do see a brighter side. When asked if CEOs expect their firm's sales revenues to increase, 78 percent felt that they will, down only 2 percent from last quarter. This cautious optimism was also reflected in expected profitability, where 66 percent anticipate an improvement.

For nearly 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
2003 2003 2004 2004 2004 2004 2005 2005

Index Score: 111.3 123.1 117.7 124.6 126.1 115.3 116.2 112.4

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

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 Q2 2005 TEC Confidence Index is a compilation of responses from more than 100 Canadian CEOs of small to mid-sized companies, surveyed May 31 - June 6, 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
Q2 2005

112 Respondents - 32% Response Rate
Margin of Error +/- 9.3%
May 31- June 6, 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 40 36%
b. About the same 51 46%
c. Worsened 21 19%
Total Respondents 112


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 21 19%
b. About the same 65 58%
c. Worse 26 23%
Total Respondents 112


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 62 55%
b. About the same 37 33%
c. Decrease 13 12%
Total Respondents 112


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 78%
b. About the same 17 15%
c. Decrease 8 7%
Total Respondents 112


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 72 64%
b. About the same 29 26%
c. Worsen 11 10%
Total Respondents 112


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 55 49%
b. About the same 45 40%
c. Decrease 12 11%
Total Respondents 112

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 38 34%
b. About the same 47 42%
c. Weaker 27 24%
Total Respondents 112

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 44 39%
b. About the same 61 54%
c. Decrease 7 6%
Total Respondents 112

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

Response Total Response Percent
a. Q2 2005 5 4%
b. Q3 2005 10 9%
c. Q4 2005 10 9%
d. Q1 2006 5 4%
e. Steadily throughout 2005 and
Q1 of 2006 35 31%
f. I do not plan to increase my
total number of employees over
the next 12 months 47 42%
Total Respondents 112

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 5 4%
b. Healthcare costs 1 1%
c. Lack of qualified candidates 34 30%
d. Rise of the Canadian dollar 16 14%
e. Uncertainty of the growth rate
of the overall economy 15 13%
f. Offshoring (outsourcing outside
of Canada) 2 2%
g. None of the above has impacted
hiring in the last five months 24 21%
h. Other 15 13%
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) 10 9%
b. Staffing (hiring and retaining
trained, quality employees) 40 36%
c. Growth (concerns with increasing
growth, and growing too quickly) 16 14%
d. Financial issues (capital, cash
flow, profitability) 20 18%
e. Economic uncertainty (concern
for local and national economy,
increasing interest rates and
strength of Canadian dollar) 20 18%
f. Other 6 5%
Total Respondents 112

12. What concerns you most about the economy?

Response Total Response Percent
a. Rising interest rates 26 23%
b. Higher fuel prices 29 26%
c. Rising deficit 13 12%
d. Inflation 9 8%
e. No concern 12 11%
f. Other 16 14%
Total Respondents 105

13. How will your employee merit increases compare to last year?

Response Total Response Percent
a. They will be more than last year 35 31%
b. They will be the same as last year 55 49%
c. They will be less then last year 11 10%
d. We don't give merit increases 11 10%
Total Respondents 112

14. What measures have you taken to offset the rising cost of energy?

Response Total Response Percent
a. Increase pricing 31 28%
b. Decrease labor costs (reduce
workforce) 5 4%
c. Negotiate the cost of raw materials 12 11%
d. Reduce research and development costs 3 3%
e. Reduce advertising and marketing 4 4%
f. Absorb the increased costs 55 49%
Total Respondents 110

15. Have your overall costs from your suppliers changed in the last
year?

Response Total Response Percent
a. Yes, costs have increased 82 73%
b. Costs have remained about the same 25 22%
c. No, costs have decreased 4 4%
Total Respondents 111

16. Would you prefer the government focus on deficit reduction measures
or tax cuts?

Response Total Response Percent
a. I would prefer deficit reduction
measures to tax cuts 39 35%
b. I would prefer tax cuts to
deficit reduction measures 49 44%
c. I do not prefer one over the
other 24 21%
Total Respondents 112

17. In your opinion, what effect does a minority government have on
Canada's economic performance/outlook?

Response Total Response Percent
a. Positive 12 11%
b. Neutral 29 26%
c. Negative 71 63%
Total Respondents 112

18. Do you feel confident that the current minority government can
effectively lead the nation?

Response Total Response Percent
a. Yes 20 18%
b. Impartial 18 16%
c. No 74 66%
Total Respondents 112

19. Do you agree or disagree with the outcome of the non-confidence
motion?

Response Total Response Percent
a. Agree 47 42%
b. Impartial 29 26%
c. Disagree 36 32%
Total Respondents 112

20. Do you think Canada would have another minority government if a
federal election was held in the next 12 months?

Response Total Response Percent
a. Yes 76 68%
c. Don't know 21 19%
d. No 15 13%
Total Respondents 112


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

http://www2.ccnmatthews.com/database/fax/2000/tec614.pdf

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