Inflation Rate and Economic Growth

Transcription

1 Inflation Rate and Economic Growth BDO Dunwoody/Chamber Weekly CEO/Business Leader Poll by COMPAS in the Financial Post for Publication June 28, 2004 COMPAS Inc. Public Opinion and Customer Research June 28, 2004

2 1.0 Introduction Despite a rise in inflation form 1.6% in April to 2.5% in May, Canada s business leaders are not concerned about the rising rate of inflation. They are also unlikely to respond to increasing inflation by either indexing salaries or prices with inflation. COMPAS asked respondents about the ability of the Canadian Government to have autonomous influence over inflation in the context of the integrated Canadian and U.S. economies. There is some debate as to how much autonomous influence the Government has on inflation. By comparison, business leaders see the Government as having slightly more influence on economic growth and about the same influence on the value of the dollar as on inflation. These are the key findings from this week s web-survey of CEOs and business leaders, performed under the sponsorship of BDO Dunwoody and the Canadian Chamber of Commerce for publication in the Financial Post. 2.0 Business Leaders Not Concerned about Rise in Inflation, Unlikely to Index Prices or Salaries with Inflation Respondents were asked to rate their concern about the rise in the inflation rate using a 7 point scale where 7 means very concerned and 1, the opposite. On average, business leaders are not concerned about the rise inflation assigning a mean score of 3.6 out of 7, below the midpoint of 4, as shown in table 1. Respondents who are not concerned about the rate of inflation outnumber those who are concerned 8:5. Some respondents explained their lack of concern as, Fuel throws inflation numbers off too much to worry about it as a real indicator. 2

3 I believe the concerns over the increase in the inflation rate in Canada are primarily based on higher fuel and insurance prices. Once these two items are removed from the calculation the inflation rate in Canada is very low. I hope that the politicians do not consider raising interest rates prematurely only due to a short term increase in oil and insurance prices. Table 1: (Q1) As you may know, the annual inflation rate rose from 1.6% in April to 2.5% in May. Using a 7 point scale where 7 means very concerned and 1, the opposite, how concerned are you about the current rate of inflation? Consistent with the apparent confidence that inflation is not yet a concern, business leaders are unlikely to index salaries or prices with inflation. As illustrated in table 2, when asked to use a 7 point where 7 means very likely and 1, the opposite, respondents assigned a mean score or 3.2 and 3.1 respectively to the prospect of indexing salaries and prices. Table 2: (Q2) Using a 7 point scale where 7 means very likely and 1, the opposite, to what extent is your organization considering indexing Salaries with inflation Prices with inflation

4 3.0 Canadian Government has Slight Autonomous Influence on Economic Growth, Little on Inflation and Value of the Dollar There is some debate as to how much autonomous influence the Canadian Government has on some aspects of the economy, including inflation, in light of the extent to which the Canadian and U.S. economies are integrated. Respondents were asked to score the extent to which the Canadian Government had autonomous influence over inflation, economic growth, and the value of the dollar. As a whole, business leaders do not view the Government as having all that much influence over any of the three. Economic growth is seen as being subject to slightly more influence, earning a mean score of 4.3, while inflation and the value of the dollar received mean score of 4.1 and 4.0 respectively, as shown in table 3. As one respondent noted, The Canadian and US economies can perform independently to some extent and over some limited periods of time, however, they inevitably re-align reflecting the degree to which they are integrated (high). Table 3: (Q3) The Canadian and US economies are sufficiently integrated that there is debate as top how much autonomous influence the Canadian Government has on the Canadian economy. Using a 7 point scale where 7 means a lot of autonomous influence and 1, the opposite, to what extent does the Canadian Government have autonomous influence over [INSERT ROTATION] Economic growth Inflation Value of the dollar

5 4.0 Methodology The National Post/COMPAS web-survey of CEOs and leaders of small, medium, and large corporations and among executives of the local and national Chambers of Commerce was conducted June 23-25, Respondents constitute an essentially hand-picked panel with a higher numerical representation of small and medium-sized firms. Because of the small population of CEOs and business leaders from which the sample was drawn, the study can be considered more accurate than comparably sized general public studies. In studies of the general public, surveys of 161 are deemed accurate to within approximately 7.7 percentage points 19 times out of 20. The principal and co-investigator on this study are Conrad Winn, Ph.D and Tamara Gottlieb. 5