TORONTO, Sept. 24 /CNW/ - Overall expectations among the owners of
Canada's small- and mid-sized enterprises (SMEs) are slightly more optimistic
than they were three months ago, according to findings from the latest survey
of business optimism released today by the Canadian Federation of Independent
Business (CFIB). Nationally, latest expectations push the September Business
Barometer index up to 101.8 from its previous cyclical low of 100.7 in June.
"Growth in the index is modest, and it's uncertain whether small business
sentiment has really bottomed out, said CFIB's chief economist Ted Mallett,
adding the index level is still low by historical standards and the economy
continues to limp along." However, the index also lends support to the idea
that Canada's Main Street economy is far more stable than the recent
volatility in the stock market might indicate. A somewhat hopeful sign, added
Mallett, is that reductions in energy cost pressures in recent weeks appear to
have given measurable relief to business perspectives.
The provincial picture
In this quarter, regional findings show mixed results, but the
fundamental areas of strength and weakness remain fairly consistent. On a
positive note Saskatchewan's index jumps back up to 113.9, followed closely by
Newfoundland and Labrador's index of 112.9-these two provinces remain the
nation's most optimistic-as they have for more than a year. Manitoba's index
remains virtually the same. Business sentiment in Quebec has rebounded
strongly to 104.5, on conditions likely related to energy costs. While Nova
Scotia has regained some of the ground lost in June, rising to 100.6. The
index in PEI has also tipped upward, back to 105.6.
BC and Alberta have fallen somewhat to 102.9 and 103.0
respectively-continuing a two-year downward trend, while New Brunswick's index
has dropped to 102.3. And, although Ontario's index has moved up to 98.3, it
still remains the least optimistic region in Canada.
The profile of optimism by industry sector has regained some of the broad
consistency lost earlier this year. Many of the weaker sectors hit hard by
fuel prices, such as transportation and hospitality, have rebounded strongly,
with the transportation index at 98.1, the highest level in a year. The
hospitality index is at 100.9, still a little below the national average, but
its increase suggests that the summer 2008 tourist season did not fare badly
The biggest negative news, however, is optimism in the manufacturing
sector, which continues to fall-with the index dropping almost two points to
98.0 in September from 99.9 in June. The U.S. slowdown in general and more
specifically its effect on automotive purchases and household big ticket items
has kept the chill on this sector. The construction sector index has stayed
more or less where it was in June, but remains well below historical
norms-suggesting weaker conditions in consumer real estate. The service
sector, traditionally the economy's fastest growing and most resilient, has
taken a few hits-not surprisingly in its financial and professional services
On the positive side, the indexes for retail at 102.2, wholesale at 99.5
and agriculture at 96.9 have all risen by a few points, likely driven by
relief on the cost of energy inputs and a belief that the consumer is still
The Canadian Dollar
It has been about a year since the Canadian dollar re-achieved parity
with the U.S. dollar and time has allowed businesses to adjust to new cost
structures. There has been a slight pull-back to the $0.93-0.97 which has
eased pressures on some export-dependent businesses. Thirty per cent of
business owners would like the Dollar to fall further, while almost as many-27
per cent would like to see it rise again.
Employment, wages and pricing plans
Employment expectations remain solid, despite concerns about business
prospects. In September, about 28 per cent of business owners hope to have
greater numbers of full-time staff in the next year, versus 11 per cent who
expect to reduce their staff count.
The results by province do not differ markedly, but those in Alberta and
Saskatchewan are the most likely to plan for employment increases, while those
in Ontario and Nova Scotia are the most likely to plan for employment
A look at wage costs and pricing decisions points to a slight easing of
inflationary pressures in the economy. About 40 per cent of business owners
expect to increase their prices by more than 2 percentage points in the next
year-down from 44 per cent who had said they would do so in June. Salary
expectations seem to be following the same pattern with about 41 per cent of
business owners expecting to have to raise wages by more than two per cent in
the next 12 months-well below levels from mid-2007.
With turbulence in the U.S. financial markets washing into Canada, it is
no surprise that people are looking for what effect these developments are
having on Main Street. This latest index clearly shows that, while the small
business economy is not immune from U.S. mortgage securities contagions,
Canada's SME sector is holding up quite well so far. The collapse of high
profile Wall Street investment banks has not yet been factored into business
owners' perspectives. The survey was conducted in the two weeks immediately
preceding those events when financial volatility was nonetheless very high.
The survey was conducted via fax and e-mail between September 2 and 12,
2008 and drew 1,681 responses. It is accurate +/-2.4 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: contact Gisele Lumsden at (416) 222-8022 or one
of our provincial offices.