Enthusiasm curbed Slowing economy, shrinking government stimulus and red tape mute business leaders' optimism

A slowing global economy, little government capacity for financial stimulus and an increasing regulatory burden may be conspiring to tamp down enthusiasm for the provincial economy among business leaders.

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Hey there, time traveller!
This article was published 17/04/2019 (1266 days ago), so information in it may no longer be current.

A slowing global economy, little government capacity for financial stimulus and an increasing regulatory burden may be conspiring to tamp down enthusiasm for the provincial economy among business leaders.

The Manitoba Business Leaders Index, which is produced every other year by Winnipeg’s Probe Research, found that optimism about Manitoba’s economic future took a significant step back compared with the last survey, in 2017.

‘It is unsettling but it’s not doom and gloom’
– Don Leitch, CEO of the Business Council of Manitoba   

This year, 61 per cent said they were optimistic or very optimistic about Manitoba’s economic future, compared with 73 per cent who said that in 2017.

Scott MacKay, the CEO of Probe Research, said, “Enthusiasm is muted. But it’s not like they’re saying things are going to hell in a hand basket. They’re just saying they really don’t know… But clearly, there’s less buoyancy.”

Probe surveyed 203 CEOs, presidents, business owners and designated senior corporate officers from small, mid-sized and large businesses in mid-March. The margin of error is plus or minus 6.9 per cent

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In addition to the decline in optimism in the provincial economy there is also a lower level of confidence among respondents when asked if their company would be performing better financially a year from now — 36 per cent this year compared with 42 per cent in 2017.

In keeping with the historically moderate nature of the Manitoba economy, which avoids booms and busts, the survey results do not foreshadow anything too traumatic.

For instance, there was little intention expressed by respondents to reduce workforces: only 10 per cent said they intend to lay off or cut their workforce over the next six months. That indicator was at the lowest level in 12 years.

As well, the difference between staff reduction and additional hiring intentions netted out to an above-average number.

“On the one hand, people are not sure of the future, and things are maybe not getting better, but they’re not laying off staff,” MacKay said.

In 2014, the intention to lay off workers was twice the level it was this year.

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As well, concerns about finding qualified new employees with relevant skills has levelled out, which MacKay says may just be a proxy for the relative rate of economic growth.

Loren Remillard, president of the Winnipeg Chamber of Commerce, acknowledges there is a little less enthusiasm out there and he points to the gloomy economic news globally as the culprit for most of that.

He said there are several factors that bring down business optimism: the unease with Chinese trade issues, which are highlighted by the problems with canola, uncertainty about the future of NAFTA, high levels of household and government debt and the increasing difficulty for business to attract and retain highly skilled staff.

“Then you add in across the board… a sense in the business community that we are heading into difficult economic times,” Remillard said.

“Governments historically have used these times for deficit financing to stimulate the economy. But there is no elasticity any more because governments used decent-to-good times to continue to use deficit financing. Now, federally, there is zero flexibility.”

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Don Leitch, CEO of the Business Council of Manitoba, which represents the largest employers in the province, said the lower optimism probably reflects the anticipated lower economic growth around the world in the coming year or two.

“Central bankers have been worried about a global slowdown in 2019 and 2020, and that’s why some wanted to inch up overnight prime rates in their countries in order to give them room to cut rates and juice the economy should they need it at some point in the next couple of years,” he said.

Leitch said Manitoba business owners, many of who are exporting out of the province and outside the country, get a sense of what is happening.

“It is unsettling but it’s not doom and gloom,” he said.

Remillard said the atmosphere of “muted optimism” is not surprising considering the level of uncertainty that lies ahead.

“On top of that, there are increasing costs being imposed on business… at the very time when the economy is not looking to be able to sustain a positive momentum,” he said.

There is a sentiment in the Probe survey that the federal Liberal government will be frightened about. In response to a question about how the three levels of government have been performing in terms of creating a good climate for business, there was a tacit endorsement for the provincial government’s performance. Thirty-eight per cent said it was doing a good or excellent job, but only a paltry nine per cent felt that way about the federal government

“As far as the business community is concerned, these Liberals have to go,” MacKay said.

martin.cash@freepress.mb.ca

Martin Cash

Martin Cash
Reporter

Martin Cash has been writing a column and business news at the Free Press since 1989. Over those years he’s written through a number of business cycles and the rise and fall (and rise) in fortunes of many local businesses.

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