RELO
Regina Executive Leadership Outlook Quarterly Report: June 2018
CONTENTS PAGE 2
Executive Summary
PAGE 3
Economic Outlook Dashboard Executive Confidence Current Conditions Fixed Investments Employment Sales Revenue Profitability Economic Factors in 2018
PAGE 7
Conclusion About the Report
Executive Summary The Regina economy remains resilient in-spite of potential economic headwinds. The Executive Confidence Index remains high at 2.39, illustrating a persistent confidence in the regional economy. Though this is a 21-point decrease from the previous quarter, the rating is still above the overall Index Average and an 8-point increase from Q2, 2017. Along with the rating, Regina executives continue to be optimistic about the growth of the economy for the Greater Regina Area (GRA). With 47.9% of respondents believing that the economy will improve in the next 12 months and 43.8% predicting the economy will remain the same. The Current Conditions Index also had a slight decrease to 2.08, though this still reflects a 20-point increase from the same time last year. The slight decrease in optimism is mostly accounted for by the increase of respondents who believe major indicators will remain stable and stay the same over the next year. With uncertainty over tri-party NAFTA negotiations, pending US Tariffs on aluminum and steel, and cooling labour force numbers, Regina executives may be tempering their enthusiasm; however, overall there appears to consistent optimism when looking toward the future. There are several factors within the Saskatchewan economy that may be impacting the current rating, and long-standing executive confidence.
2
Positive:
˙ stabilized oil prices; ˙ record manufacturing employment numbers; ˙ provincial budget transiting away from austerity; ˙ recent major events (e.g., Memorial Cup, CP Women’s Open); and, ˙ successful supercluster bid from Protein Industries Canada.
Challenges: ˙ soft labour market numbers; ˙ high commercial office space vacancy; ˙ soft uranium prices and oversupply of Potash; and, ˙ reduced public sector stimulus and infrastructure spending.
Regina Executive Leadership Outlook
Economic Outlook Dashboard CURRENT CONDITIONS
EXECUTIVE CONFIDENCE In the second quarter of 2018, the Executive Confidence Index is 2.39, a decrease of 21 points (2.60) from the first quarter of 2018. Although a slight decrease, the Executive Confidence Index remains above the overall Index Average. This quarter’s results still suggest that Regina executives maintain a positive outlook for the next year, almost half (47.9%) of respondents believe that the economy will perform better in the next 12 months. 43.8% believe that the economy will remain the same.
A calculation similar to the Executive Confidence Index reports executives’ perception of today’s economic conditions as compared to one year ago. When asked to compare the economic condition of their business to one year ago, executives rated the current economic condition of their business at 2.08. This point has been consistently above the neutral mark over the past year indicating that conditions have improved from the previous year. To date, the Confidence Index and Current Conditions Index are strongly correlated (r=.915, p < .001), indicating that a change in current conditions is likely to be accompanied by a similar shift to the confidence index.
3.0
2.5
2.0
2.23
2.08
2.11
2.23
2.21
2.39
2.36
2.31
3.0
2.60
2.55
2.31
2.60
2.55 2.5
2.23
2.31
2.08
2.11
2016 Q2
2016 Q3
2.23
2.21
2016 Q4
2017 Q1
2.39
2.36
2.31
2.0 1.5 1.5 1.0
2016 Q1
2016 Q2
2016 Q3
2016 Q4
2017 Q1
2017 Q2
2017 Q3
2017 Q4
2018 Q1
2018 Q2
Confidence Index Index Average
The Executive Confidence Index is a single statistic calculated to gauge leadership confidence in the future economy. It is an average taken from a series of questions asking executives to look ahead 12 months. These questions ask executives about the future of the GRA’s economy, their business’ future investments, future number of employees, future sales revenue and future profitability. In each question, a numeric value is assigned to a verbal response. A value of ‘1’ indicates an expected decrease. A value of ‘2’ indicates an expectation of the status quo, while a value of ‘3’ indicates an expected increase. This statistic assumes equal weight across all five economic questions. The result is an average of all responses. In this calculation, the lowest possible result is 1.0 and the highest possible result is 3.0. A result above 2.0 means that executives are optimistic about the economic outlook for their business, while a result under 2.0 suggests that executives are pessimistic about the economic outlook for their business.
economicdevelopmentregina.com
1.0
2016 Q1
2017 Q2
2017 Q3
2017 Q4
2018 Q1
2018 Q2
Confidence Index Current Conditions
Half (53.1%) of the respondents believe the current economy is performing about the same as compared to one year ago. Twenty-eight percent (28.6 %) believe the economy is preforming better.
Almost half (47.9%) of respondents believe that the economy will perform better in the next 12 months.
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FIXED INVESTMENTS
EMPLOYMENT
The majority (89.2%) of respondents expect their total fixed investments to remain the same or increase over the next twelve months. This has decreased over the past two quarters by 2.4 points. Within this indicator, the number of respondents expecting investments to increase has fallen by 14.8%, and those anticipating fixed investments to stay the same has increased by 12.4%.
The majority (91.5%) of respondents expect to employ more or the same amount of people over the next year. The overall sum of respondents who expect to employ more and the same amount of people has remained relatively unchanged (decrease of 5.7%); however, the distribution of respondents has changed significantly. The percentage of those who believe they will employ the same number has increased from 38.9% to 55.3%. The percentage of those who believe they will employ more people has decreased from 58.3% to 36.2%.
In the next 12 months, will your firm’s total fixed investments…
In the next 12 months, will the number of people your firm employs…
HISTORICAL COMPARISON 80%
HISTORICAL COMPARISON 70%
80%
60%
70%
45.7% 50%
55.3%
60%
43.5% 40%
50%
30%
40%
36.2%
30%
20%
10.9%
10%
20%
0%
10%
8.5% 2016 Q1
2016 Q2
2016 Q3
2016 Q4
2017 Q1
2017 Q2
2017 Q3
2017 Q4
2018 Q1
2018 Q2 0%
QUARTERLY COMPARISON
2016 Q1
2016 Q2
2016 Q3
2016 Q4
2017 Q1
2017 Q2
2017 Q3
2017 Q4
2018 Q1
2018 Q2
100
QUARTERLY COMPARISON
80
58.3%
43.5%
100
60
36.2%
80 40 20 0
Increase Stay the Same Decrease
33.3%
45.7%
8.3%
10.9%
2018 Q1
2018 Q2
58.3% 60 40 20 0
55.3% 38.9% 8.5% 2018 Q1
2.8%
2018 Q2
Increase Stay the Same Decrease
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Regina Executive Leadership Outlook
SALES REVENUE
PROFITABILITY
About sixty percent (58.7%) of respondents expect sales revenue to increase in the next 12 months. Only 8.7% expect sales revenue to decrease. The expectation for decrease has been relatively steady around 10% for the past year. Similar to the last two confidence indicators, the number of those who expect sales revenue to increase has fallen (by 13.5%), while those who expect sales to stay the same increased slightly (7.6%).
Over half (52.1%) of respondents expect their business profitability to increase over the next year. Just over one third (39.6%) expect business profitability to remain the same. Similar to the other indicators this quarter, we observe a decline in the number of respondents who believe the indicator will increase and observe slight rise in both the number of respondents who expect profitability to stay the same or decrease.
In the next 12 months, will your firm’s sales revenue…
In the next 12 months, will the number profitability…
HISTORICAL COMPARISON
HISTORICAL COMPARISON
80%
80%
70%
70%
58.7% 60%
60%
50%
50%
52.1%
39.6% 40%
32.6%
30%
40%
30%
20%
20%
8.7% 10%
8.3% 10%
0%
2016 Q1
2016 Q2
2016 Q3
2016 Q4
2017 Q1
2017 Q2
2017 Q3
2017 Q4
QUARTERLY COMPARISON
2018 Q1
2018 Q2
0%
2016 Q1
2016 Q2
80
58.7% 72.2%
60
2017 Q2
2017 Q3
2017 Q4
2018 Q1
2018 Q2
52.1%
61.1%
40
40
0
2017 Q1
100
80
20
2016 Q4
QUARTERLY COMPARISON
100
60
2016 Q3
32.6%
20
8.7%
0
25.0% 2018 Q1
2.8%
2018 Q2
Increase
Increase
Stay the Same
Stay the Same
Decrease
Decrease
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39.6%
33.3%
8.3% 2018 Q1
5.6%
2018 Q2
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ECONOMIC FACTORS IN 2018 There are some events which occurred during the past two quarters which may have had an influence on the Greater Regina Area’s (GRA) executive outlook. In this edition, we developed a snapshot and analysis of some of the largest potential economic influences on the Regina Executive Leadership Outlook (RELO).
Resource Prices Development and export of natural resources has a profound effect on the Saskatchewan economy. The influence is felt in rural areas and every Saskatchewan city due to impacts across supply chains and in government revenues. The oil and gas market experienced some recovery in early 2018: West Texas Intermediate Crude Oil prices were $ 63.70 USD1 per barrel in January, increasing to $ 66.25 USD in April. These prices are anticipated to taper slightly to $ 60.00 USD per barrel over the next quarter. Potash has also been relatively stable the past two quarters at $216.00 USD2 per metric ton.
New Provincial Leadership In January 2018, Scott Moe was elected the new leader of the Saskatchewan Party and Premier of Saskatchewan. In March 2018, Ryan Meili was elected as leader of the New Democratic Party. Both elections present an opportunity for economic policy change.
New Provincial Budget The Saskatchewan Government presented the provincial budget, themed ‘On Track’3 relating to the anticipation of returning to a balanced budget by 2019–2020. There were very minor budgetary adjustments, a 1.4% forecasted decrease in spending and no sales tax increases. Positively, the budget highlighted new tax incentives for value-added agriculture and technology startups – both areas of importance to our RELO respondents as highlighted in the 2018 Q1 edition.
Tourism Opportunities Over the past two quarters, Regina has hosted multiple major events and conventions (Tim Hortons Brier, Memorial Cup, Congress of Humanities and Social Sciences), expected to have a positive impact on the city.
Protein Industries Canada4 In February, a Saskatchewan-based group were successful in their bid for investment from the Government of Canada Supercluster Initiative. Protein Industries Canada includes businesses and organizations across the Prairie provinces and is viewed to potentially lead to new investment and growth in the GRA.
U.S. Energy Information Administration (EIA), Short-term Energy Outlook Data Brower, West Texas Intermediate Crude Oil Spot Price
1
2
Index Mundi, Commodity Prices, Potassium Chloride Monthly Price
3
http://publications.gov.sk.ca/documents/15/106323-14237%202018% 20Budget%20highlights%20card-English-FA%20F%20Apr%205.pdf
4
https://economicdevelopmentregina.com/news/issue-25
Development and export of natural resources has a profound effect on the Saskatchewan economy.
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Regina Executive Leadership Outlook
Conclusion This quarter business executives remain positive and are expecting a stable economic environment in the next year. The Executive Confidence Index is currently 2.39, a decrease from the previous quarter, though still an 8-point increase from this time last year. This is a shift in anticipation of an economic situation that will not greatly change in the coming year. There is still a good deal of uncertainty based on many factors which could be the cause for tempering Regina executive enthusiasm.
ABOUT THE REPORT Economic Development Regina (EDR), in partnership with Praxis Consulting (Praxis), began a quarterly publication entitled, “Regina Executive Leadership Outlook” in September 2014 that captures the thought leadership of senior business leaders in the Greater Regina Area (GRA) on key issues facing Regina and surrounding areas. The survey is distributed to a list of approximately 90 senior business leaders. The survey has a standard component entitled “The Economic Outlook.” This is a set of static questions asked each quarter that inform a unique Executive Confidence Index. This index is used to measure how confident executives are in Regina’s overall economy across each quarter. Every second quarter, Praxis and EDR pick a specific topic as the focus of the publication. Praxis then develops a survey questionnaire to gather quantitative data and an interview questionnaire to gather qualitative data using the chosen topic.
Survey Fieldwork for this project included 50 surveys completed by CEOs and senior executives in Regina’s business community. Survey responses were received via an online survey, delivered to each participant by email. Responses were collected May 9 – May 23, 2018. A total of 84 survey invitations were sent; the response rate is 59.5.%. Margins of error cannot be applied to this type of non-probability sample. In many cases data is captured on symmetrical, verbally-anchored five-point response scales. ˙ On
this scale, responses of 1 or 2 are negative; a response of 3 is neutral, and responses of 4 or 5 are positive.
˙ This
report shows frequency of response at every option in the response set, along with a mean, to indicate the overall level of response.
economicdevelopmentregina.com
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ABOUT EDR
ABOUT PRAXIS
Economic Development Regina Inc. (EDR) is the economic development agency for the Greater Regina Area.
Praxis Consulting is Saskatchewan’s largest locally-based management consulting firm.
EDR is a not for profit economic development corporation, governed by a volunteer board of directors. EDR provides leadership to the community to support industry growth and diversification through retention and expansion of existing business and encouraging investment, development of industry and tourism.
Praxis works collaboratively with clients in the facilitation of growth and excellence. Leveraging an unmatched wealth of experience across multiple sectors, Praxis adds value to their clients through:
In collaboration with key stakeholders, we work to identify, develop and promote opportunities that advance economic prosperity and ensure the Greater Regina Area offers a vibrant and diversified economy for investors, is a positive destination experience for visitors and offers a high quality of life for residents.
˙ Strategy:
David Froh, Vice President E: dfroh@economicdevelopmentregina.com P: 306-789-5099 ext 230
˙ Research:
Information gathering and data analytics.
Thought-leadership, rigorous planning, and pragmatic strategies.
˙ Results:
Cascading strategy and culture within the organization.
Val Sluth, Managing Principal E: info@praxis-consulting.ca P: 306-545-3755