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

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

May 30, 2006 10:00 ET

TEC International: Canadian CEOs Confidence in the Nation's Economy Falls

CALGARY, ALBERTA--(CCNMatthews - May 30, 2006) -

Canadians should expect to pay more for products and services over the next 12 months

After a surge in confidence over the last two quarters, Canadian chief executives' economic expectations for the next 12 months slipped by 4.8 percent, according to a survey released today by TEC Canada. Canadian bosses' confidence, which rebounded in Q4 2005 and Q1 2006 from a two-year low of 112.1, slipped from last quarter's 122.4 to 117.6.

More than half of Canada's SME leaders feel that the current economy has improved over last year's, however they are not as confident as they were last quarter that the economy will continue to surge ahead over the next 12 months. They anticipate lower returns in revenue and profit than originally expected at the start of the year and will therefore curb their fixed investment expenditures and new staff hiring plans as a result.

Of the 69 percent of respondents who anticipate hiring in the next 12 months, a 10 point drop over Q1, the bulk will increase their staff size by steadily hiring over the next four quarters. However, 17 percent will be topping up their staff numbers during Q2 of this year.

When asked to identify their most significant business issue, Canada's bosses once again said it was staffing. Additionally, 47 percent of those surveyed saw a lack of qualified candidates as having the most significant impact on hiring, while 53 percent listed factors such as oil/energy prices, the rise of the Canadian dollar and the like as the issue.

Fueled in large part by the rising cost of oil and gas, the Canadian dollar will continue its upward climb, according to this quarter's respondents. To offset the cost of energy, 36 percent of business leaders will be raising their prices while 30 percent opted to absorb it; 6 percent of those surveyed are decreasing their labour costs as a result.

The strong loonie has had a mildly negative or negative impact on the industries of 58 percent of Canada's SME bosses, according to this quarter's survey. As a result of the dollar's northward climb, 20 percent of chief executives have decelerated their company's expansion plans.

On a brighter note, the 2006 federal budget is receiving positive reviews. When asked what impact the new budget will have on their businesses over the next 12 months, 52 percent of respondents expect a mildly positive or positive impact. Additionally, 72 percent anticipate a positive or mildly positive tax effect as well.

This positive outlook, however, was not reflected in their responses when asked about a rate hike by the Bank of Canada. A whopping 71 percent of CEOs surveyed anticipate a negative impact on the Canadian economy stemming from a hike in the Bank of Canada rate.

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 Canada's 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
2004 2004 2005 2005 2005 2005 2006 2006

Index Score: 126.1 115.4 116.2 112.4 112.1 121.9 122.4 117.6

Current Economic
Conditions 137 145 125 117 125 136 134 142
Expected Economic
Conditions 129 113 109 96 102 109 119 110
Planned Fixed
Investment 154 128 136 144 130 149 146 144
Planned Revenue
Growth 181 165 174 171 166 176 181 167
Expected Profit
Growth 166 156 156 155 146 159 155 143
Expected Change
in Employment 154 135 147 138 148 159 158 151


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 $900 million 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 2006 TEC Confidence Index is a compilation of responses from more than 100 Canadian CEOs of small to mid-sized companies, surveyed May 15 - May 23, 2006. The TEC Confidence Index is the only comprehensive report of their opinions and projections. TEC Canada conducts the TEC Confidence Index quarterly.

ABOUT TEC CANADA

T.E.C. (The Executive Committee) Ltd. is a part of an international organization for chief executives (CEOs), managing directors, business owners and bottom line decision makers offering confidential business advisory sessions and professional support. TEC was established in Canada in 1985 and currently has 730 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 facilitation and 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 VISTAGE INTERNATIONAL (FORMERLY KNOWN AS TEC INTERNATIOANL)

Vistage International, formerly known as TEC International, 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 12,000 business leaders. TEC member companies grow, on average, at a rate 2.5 times faster than they did prior to joining (source: D & B 1998-2003). For more information, visit www.vistage.com.



TEC Confidence Index
Q2 2006

115 Respondents - 28% Response Rate
Margin of Error +/- 9.1%
May 15 - May 23, 2006


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

Response Total Response Percent
a. Improved 64 56%
b. About the same 35 30%
c. Worsened 16 14%
Total Responses 115

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 37 32%
b. About the same 53 46%
c. Worse 25 22%
Total Responses 115

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 64 56%
b. About the same 38 33%
c. Decrease 13 11%
Total Responses 115

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 76%
b. About the same 18 16%
c. Decrease 10 9%
Total Responses 115

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 65 57%
b. About the same 34 30%
c. Worsen 16 14%
Total Responses 115

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 70 61%
b. About the same 34 30%
c. Decrease 11 10%
Total Responses 115

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 63 55%
b. About the same 43 37%
c. Weaker 9 8%
Total Responses 115

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 59 52%
b. About the same 48 42%
c. Decrease 7 6%
Total Responses 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. Q2 2006 10 9%
b. Q3 2006 20 17%
c. Q4 2006 7 6%
d. Q1 2007 4 3%
e. Steadily throughout the next 12
months 39 34%
f. I do not plan to increase my total
number of employees over the next
12 months 35 30%
Total Responses 115

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 13 11%
b. Healthcare costs 0 0%
c. Lack of qualified candidates 54 47%
d. Rise of the Canadian dollar 14 12%
e. Uncertainty of the growth rate of
the overall economy 5 4%
f. Offshoring (outsourcing outside
of Canada) 3 3%
g. None of the above has impacted
hiring in the last five months 15 13%
h. Other, please specify 11 10%
Total Responses 115

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) 9 8%
b. Staffing (hiring and retaining
trained, quality employees) 55 48%
c. Growth (concerns with increasing
growth, and growing too quickly) 17 15%
d. Financial issues (capital, cash
flow, profitability) 15 13%
e. Economic uncertainty (concern for
local and national economy,
increasing interest rates and
strength of Canadian dollar) 15 13%
f. Other 4 3%
Total Responses 115

12. What measures are you taking to offset the rising cost of energy?
Choose all that apply.

Response Total Response Percent
a. Increasing prices 41 36%
b. Decreasing labour costs (reduce
workforce) 7 6%
c. Outsourcing services 5 4%
d. Reducing the cost of raw materials 6 5%
e. Reducing research and development
costs 1 1%
f. Reducing advertising and marketing
expenses 1 1%
g. Absorbing the increased costs 35 31%
h. Conserving energy 9 8%
i. Other 8 7%
Total Responses 113

13. In what industry do you operate?

Response Total Response Percent
a. Manufacturing 29 26%
b. Service 10 9%
c. Construction 7 6%
e. Other, please specify 69 62%
Total Responses 112

14. How has the increase in the strength of the Canadian dollar
affected your industry?

Response Total Response Percent
a. Positive affect 17 15%
b. Mild positive affect 11 10%
c. No affect 20 17%
d. Mild negative affect 30 26%
e. Negative affect 37 32%
Total Responses 115

15. How has the increase in the strength of the Canadian dollar
affected your business plans for expansion over the next 12
months?

Response Total Response Percent
a. It has accelerated expansion plans 7 6%
b. It has not affected expansion plans 64 56%
c. It has decelerated expansion plans 23 20%
d. We do not plan to expand over the
next 12 months 21 18%
Total Responses 115

16. Do you believe that a rate hike by the Bank of Canada would have a
positive, negative, or no impact on the Canadian economy over the
next 12 months?

Response Total Response Percent
a. Positive impact 17 15%
b. Negative impact 82 72%
c. No impact 15 13%
Total Responses 114

17. Do you believe a rate hike by the Bank of Canada is likely to be
over 50 basis points?

Response Total Response Percent
a. Yes 30 26%
b. No 58 50%
c. Don't know 27 23%
Total Responses 115

18. What impact, if any, will the 2006 federal budget have on your
business over the next 12 months?

Response Total Response Percent
a. Positive impact 14 12%
b. Mild positive impact 46 40%
c. No impact 51 44%
d. Mild negative impact 3 3%
e. Negative impact 1 1%
Total Responses 115

19. In your view, what is the tax effect of the 2006 federal budget?

Response Total Response Percent
a. Positive effect 19 17%
b. Mild positive effect 63 55%
c. No effect 28 24%
d. Mild negative effect 4 3%
e. Negative effect 1 1%
Total Responses 115

20. In which countries outside of Canada are you currently conducting
business?

Response Total Response Percent
a. China 2 2%
b. India 1 1%
c. U.S.A. 64 56%
d. Europe 5 4%
e. Asia (excluding China) 2 2%
f. Not conducting business outside
of Canada 28 24%
g. Other, please specify 13 11%
Total Responses 115

21. How much of your advertising budget do you plan to spend on online
advertising?

Response Total Response Percent
a. Less than 5% 46 40%
b. 6 - 10% 18 16%
c. 11 - 20% 10 9%
d. 21 - 40% 8 7%
e. 40% or more 2 2%
f. None 24 21%
g. Do not advertise 7 6%
Total Responses 115

22. Are you willing to be contacted by the media?

Response Total Response Percent
a. Yes 29 25%
b. No 86 75%
Total Responses 115


NOTE: Two graphs are viewable on the CCNMatthews' website at the following link: http://www.ccnmatthews.com/docs/529teclink.pdf

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