Corporate profits and revenues are estimated to decline in the year ahead, according to a fourth-quarter survey of Canada’s chartered accountants.

This is the first time that corporate profits have been estimated to decline since the inception of the study in second quarter of 2007.

According to the CICA/RBC Business Monitor Q4 2008 survey profits are now expected to decrease 2.4%. That’s a sharp reversal from Q4 2007 survey, where profits for the next 12 months were projected to increase 3%.


Similarly, in the Q4 2008 survey, revenues are expected to decrease 1.6%. In the 2007 survey, revenues for the next 12 months were projected to increase 3%.


In addition, the survey also found that optimism in the Canadian economy has hit rock bottom. Only 2% of the respondents were optimistic about the economy over the next 12 months compared to 63% a year ago.

RBC Economics is forecasting that the Canadian economy likely declined in the fourth quarter of 2008 with these recessionary conditions continuing into the first quarter of 2009.

Optimism about their own business has also declined among CAs. Only 23% were optimistic about the prospects facing their companies over the next 12 months, compared to 57% in Q4 2007.

“These are certainly volatile times and that uncertainty is impacting optimism in the Canadian economy,” says Kevin Dancey, CICA president and CEO. “Businesses are looking at ways to ensure that their operations remain viable. The most creative will be the most successful.”

From a regional perspective provincial optimism has dropped drastically in each of the following provinces: British Columbia (4% compared to 87% in Q4 2007); Alberta (15% versus 60% in Q4 2007); Quebec (6% compared to 44% in Q4 2007); and Ontario (0% versus 28% in Q4 2007). Declines in business optimism on a year over year basis are at least down 25% in each province.

“While RBC Economics forecasts a rocky start for 2009 for Canadian businesses, it’s important to remember that our economic fundamentals are much stronger than that of our largest trading partner, the United States,” says Shauneen Bruder, executive vp, business and commercial banking, RBC Royal Bank. “As a result, there are significant opportunities available for well positioned businesses here in Canada.”

The CICA/RBC Business Monitor is issued quarterly, based on a survey conducted by The Canadian Institute of Chartered Accountants (CICA). The report draws upon business insights of CAs in leadership positions in privately and publicly held companies across Canada.

IE