Canadians should expect to pay more for products and services over the next year.

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

More than half of Canada’s business 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% 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% will be topping up their staff numbers during Q2.

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

Fuelled 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% of business leaders will be raising their prices while 30% opted to absorb it; 6% 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% of Canada’s bosses, according to this quarter’s survey. As a result of the dollar’s northward climb, 20% 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% of respondents expect a mildly positive or positive impact. Additionally, 72% 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% 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.