After falling sharply in August, small business confidence in Canada gained a point in September, with an index of 62.7, according to the Canadian Federation of Independent Business’ (CFIB) business barometer.
While confidence improved in September, the index was still well below the near-70 mark that prevailed for most of early 2011.
Ted Mallett, chief economist and vice-president for CFIB, said “September's one-point gain is within the margin of error for the indicator, so although not a solid sign of improvement, it suggests that the economy is not accelerating downward.”
“Concern over fallout from the fiscal crises in the U.S. and Europe spreading to Canada is still with us, but for the most part, small business operating plans and expectations are tilted toward stability, if not to modest growth.”
Business owners in Alberta showed the highest level of optimism, with an index level of 74.4, while B.C. recorded numbers slightly above the national average at 63.7.
The least optimistic business owners were found in Ontario and Quebec, with their index levels falling below the 60-mark to 58.6, suggesting larger-than-average concerns over near-term prospects for the U.S. economy.
A wide variance in perspectives by sector showed that those in the construction, retail and hospitality sectors were the least optimistic, with index levels all below 58.
Manufacturing, transportation, financial services and business services also showed only roughly average levels of optimism.
Only businesses in the natural resources, information, and health and education sectors appeared to be able to rise above the general mood.
According to the barometer, employment plans and general opinions on business performance expectations to the end of the year were on par with 2010 levels. Plans for price and wage increases continued to range between 1.5% and 1.7%, well above recession-level indicators.
“The only real sign of cutbacks amid concern about the potential for an economic slowdown centre on capital expenditures,” said Mallett.
“Only about half of business owners are planning to spend on vehicles, equipment or property in the next three or four months, versus the roughly 60% we would normally see in a solidly growing economy. Owners appear to be operating conservatively, conserving cash and focusing on keeping their businesses steady rather than making bets on future growth.”
Measured on a scale between 0 and 100, an index level above 50 means owners expecting their businesses' performance to be stronger in the next year outnumber those expecting weaker performance. According to past results, index levels normally range between 65 and 75 when the economy is growing.
Jennifer Harrison
@JHarrisonBIV