Quarterly Business Barometer - Canadian small businesses "playing it safe" - CFIB



    TORONTO, Dec. 19 /CNW/ - Small businesses are feeling cautious in light
of the high dollar, oil prices and volatility in the financial markets, the
latest survey of business optimism by the Canadian Federation of Independent
Business shows. Overall business optimism is at its second-lowest level since
2001 and retail performance is virtually flat this holiday season.
    Nationally, CFIB's quarterly Business Barometer is at 104.2, down from
108.4 in September, although optimism remains strong in several provinces.
"Canadian small and mid-sized businesses seem to be playing it safe right
now," CFIB's Chief Economist Ted Mallett says. "Hiring and investment plans
have been scaled back slightly, although they are still growing, and overall
enthusiasm about the future has dampened."

    The provincial picture

    This quarter saw declines in business optimism in Alberta, Manitoba,
Ontario, Nova Scotia and British Columbia, although BC remains well above the
national average. The most optimistic province is Saskatchewan at 115.2, down
slightly compared to September. New Brunswick and Newfoundland and Labrador,
where businesses are fairly upbeat, saw little change. Quebec and PEI continue
to hover at or somewhat below the national average.

    By sector

    Eight out of ten industry groupings in the survey saw a decline, the
largest being in transportation. "That's probably not a surprise," Mallett
says, "given fuel prices, a drop in shipments and clogged border crossings."
Businesses in the agriculture, retail and wholesale industries are also less
optimistic than the overall average.
    Business expectations in the construction and manufacturing sectors are
in the 104-105 range. "Given the issues manufacturers have had with the
dollar, it's a good sign that the index is as strong as it is," Mallett says.
The hospitality sector is also doing well with an index of 110, despite lower
travel demand from the US. As usual, the financial and business services
sector is well ahead of the rest of the economy with industries in this
grouping showing index levels of 113 or higher.
    Retail performance is looking mediocre this holiday season, compared to
historical averages. About seven per cent of retailers report much stronger
performance than last year but just as many say things are much worse. Roughly
a third of retailers say business is somewhat better and a quarter say it's
somewhat worse. The remaining 27 per cent have seen no significant change
compared to last year.

    The Canadian dollar

    For first time since the Canadian dollar started its long rise, SME
owners are displaying strong opinions. In previous surveys, preferences for a
lower dollar had only slightly out measured preferences for a continued rise.
With the Canadian dollar hitting the US$1.10 mark in November, before settling
to near parity, fully 38 per cent of respondents would like to see the dollar
fall further, while 17 per cent would like to see a higher value.

    Employment, wage and pricing plans

    Employment expectations remain reasonably upbeat. Approximately 31 per
cent of business owners hope to have greater numbers of full-time staff 12
months from now-slightly more than the 30 per cent who expected an increase in
June. Businesses in Alberta, British Columbia, Saskatchewan, Manitoba, New
Brunswick and Newfoundland and Labrador are the most likely to have plans for
increased full-time staff levels.
    In sharp contrast to earlier findings, however, there appears to be
significantly lower price and wage pressure in the SME economy. Only 37 per
cent of business owners are expecting to have to raise wages by more than two
per cent in the next 12 months-the lowest level in more than a year.
Similarly, only 28 per cent are expecting their prices to increase in excess
of two per cent - the lowest proportion since early 2005.
    Volatility in financial markets, worldwide oil markets and Canadian
currency markets have persisted and have ultimately dampened the outlook for
small and mid-sized businesses this month. Not surprisingly, the
goods-producing sectors and businesses in Central Canada are the most
tentative.
    "It remains to be seen if conditions in the US economy worsen in the next
few months and if so, to what degree the effects will be felt in Canada,"
Mallett says. "Playing it safe appears to be the strategy Canadian small
businesses are taking."
    The survey was conducted via fax and e-mail Nov. 21 to Dec. 5, 2007 and
drew 1,751 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: Judy Langford or Gisele Lumsden at (416)
222-8022


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