Business Barometer - High energy costs and economic uncertainty fuels decline in business optimism - CFIB



    TORONTO, June 25 /CNW/ - Expectations among Canada's small- and mid-sized
enterprises (SMEs) took a sharp tumble in June, according to the latest survey
of business optimism by the Canadian Federation of Independent Business.
Latest expectations push the Business Barometer index down for the third
consecutive quarter, to its lowest level since third quarter 2001.
    "The sharp run-up on fuel prices, coupled with continued weakness in the
US export markets have taken their toll on business optimism," said CFIB's
Chief Economist Ted Mallett, adding, "the weakness is most pronounced among
businesses exporting to the US and those with larger payrolls." Nationally,
the Business Barometer stands at 100.7, well down from 104.0 released in March
and 104.2 released in December, 2007.

    The provincial picture

    This quarter finds weakening expectations in virtually every province.
The only major improvement was found in Alberta, where the index rose to 106.3
in June from 102.8 in March.
    Continuing the profile found last March, owners in Saskatchewan and
Newfoundland and Labrador businesses remain the nation's most optimistic with
index levels both at 110.3, although well under March's findings. Businesses
in British Columbia and New Brunswick also paired up above the national
average with a 105.2 index level. Manitoba businesses were not far behind at
103.0 - only slightly below the March level.
    There was a slight drop in optimism in Quebec with an index level of
100.2 compared to 101.6 in March. The decline was considerably greater in
Ontario and Nova Scotia, where their indexes dipped significantly to 96.9 and
93.3 respectively. The index was in similar territory in Prince Edward Island,
at 97.3, close to its March level.

    By sector

    The profile of optimism by industry sector has remained more or less
consistent - with higher levels in the services sector and lower levels in
goods producing industries. Index scores among agricultural business (94.1),
transport companies (91.2) and manufacturers (99.9) remained weak in June, but
not far from what they reported in March. Optimism fell a few points among
wholesalers and retailers, to 98.4 and 100.7 respectively, while index scores
among business-related and financial services remained steady near the 106
level.
    The biggest negative news, however, came from the construction and
hospitality sectors. The previously robust construction index dropped more
than eight points to 98.7 in June, suggesting that economic uncertainty is
encouraging businesses and consumers to begin holding off on major real estate
outlays. For the hospitality sector, which includes restaurants and
accommodation providers, the index went into freefall by more than 11 points,
from 107.4 to 96.2. Food price uncertainty, coupled with concerns that people
will be travelling considerably less during the peak tourist season this year
because of fuel prices, are slamming the sector from both directions.

    The Canadian dollar

    Concerns about the level of the dollar eased only somewhat during the
past three months. Thirty-two per cent of business owners would like to see a
lower dollar, while 18 per cent would like to see it appreciate versus its US
counterpart. Export-oriented farmers, manufacturers and transport companies,
in particular, are hit doubly by poor exchange impacts and slow market demand
south of the border.

    Employment, wages and pricing plans

    Employment expectations still remain positive. About a quarter of
business owners hope to have greater numbers of full-time staff 12 months from
now - significantly lower, however, than the 30 per cent who expected an
increase in March. Unfortunately, the numbers expecting to have fewer
full-time staff also increased another two percentage points to 10 per cent.
    Businesses in Alberta, Newfoundland and Labrador, New Brunswick and
British Columbia are the most likely to have plans for increased full-time
staff levels. Businesses in Ontario, Manitoba and Quebec show the weakest
staffing plans.
    Adding a significant weight on business expectations in June, fuel price
pressures are spreading throughout the production chain and inflationary
pressures are building. Forty-four per cent of business owners are expecting
to increase their prices in excess of two per cent - a 10-point increase from
three months ago.
    The survey was conducted via fax and e-mail between June 2 and 13, 2008
and drew 1,874 responses. It is accurate +/-2.3 per cent 19 times out of 20.
The full report and provincial details are available at www.cfib.ca

    CFIB is Canada's largest association of small- and medium-sized
businesses. Encouraging the development of good public policy at the federal,
provincial and municipal levels, CFIB represents more than 105,000 business
owners, who collectively employ 1.25 million Canadians and account for $75
billion in GDP.
    Business Barometer is a quarterly publication of the Canadian Federation
of Independent Business and is a registered trademark.





For further information:

For further information: Judy Langford or Gisele Lumsden, (416)
222-8022


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