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Canadian CFOs predict hiring freeze in 2014: report

A sign marks the entrance to a job fair in New York October 24, 2011. REUTERS/Shannon Stapleton (Reuters)

The people responsible for the budgets at Canadian companies are getting more optimistic about economic growth, but doing little to contribute to it.

A new survey from Deloitte shows some Canadian chief financial officers expect to invest only a modest amount to grow their firms and plan no hiring in the near term.

The hiring freeze is the result of sliding sales and earning growth expectations in the fourth quarter, which Deloitte says fell to their lowest level in the past 10 quarters.

"Canadian CFOs are continuing to show relatively strong net optimism overall, but this has not translated into stronger positive expectations for their companies' economic prospects in the shorter term," said Bill Cunningham, leader of Deloitte's CFO program in Canada.

The Canadian CFOs surveyed in November said they expected sales to grow about 4.2 per cent, which is about a third lower than what they have been predicting over the past two years, according to Deloitte.

It says their earnings growth forecast of 3.7 per cent is less than half the traditional figure and well below the North American average.

Capital expenditures were also forecast to grow a modest 2.2 per cent.

“That may help to explain why, for the first time since our survey began, Canadian CFOs are predicting no increase at all in domestic hiring,” said Cunningham.

On the bright side, the survey includes just 16 Canadian CFOs, among 100 participants from Canada, the U.S. and Mexico. That could leave room for a lot of other, more optimistic CFOs to invest and hire to help spur economic growth in Canada.

Bank of Canada governor Stephen Poloz has complained about companies sitting on their cash when they could be investing it to help drive economic growth.

The Deloitte survey also shows Canadian CFOs are more pessimistic than their peers in the U.S. and Mexico.

When it comes to capital spending, U.S. CFOs cited growth of 6.7 per cent, while in Mexico it was even higher at 12.6 per cent. CFOs in both the U.S. and Mexico also saw earnings growth of 10 per cent.

While U.S. CFOs saw lower sales growth than in Canada, at 3.8 per cent in the fourth quarter, they had bigger hiring plans. U.S. CFOs expect a 1.7-per-cent rise in domestic hiring early in 2014,says the report.

"The low expectations for capital expenditure growth among Canadian CFOs should be a concern for anyone who wants to see Canada's productivity increase in order to strengthen the Canadian economy," said Eddie Leschiutta, regional leader of Deloitte Canada's CFO program. "Unfortunately, too many Canadian companies have been underinvesting in productivity-enhancing measures, and the latest CFO Survey suggests the problem is going to continue for the foreseeable future."

It’s not hard to understand why Canadian corporate executives are more pessimistic, given the underperformance of its main stock market in 2013 compared to its U.S. counterparts, a falling currency and muted growth forecasts for 2014.

A recent TD Bank report also shows Canadian companies are struggling to post profits like they did before the last recession.

Bloomberg News recently forecast that Canada’s unemployment rate would be higher than the U.S. by the end of this year, for the first time since 2008.

Deloitte’s survey also comes after theGlobal Economic Conditions Survey (GECS), published in August, which shows Canadian respondents have faith in the global economic recovery, but less so in their own nation’s economy.