Small business confidence makes solid gain in first quarter of 2007



    TORONTO, March 28 /CNW/ - The latest Business Barometer by the Canadian
Federation of Independent Business (CFIB) shows a solid gain in confidence
within Canada's small and mid-size business sector. The CFIB Business
Barometer Index now stands at 108.7 (1988=100), up from 107.0 in December.
"This brings the index back up into its historic mid-range - which corresponds
with a sustainable 2.5 to 3.0 per cent growth rate in Canada's GDP," said
CFIB's chief economist, Ted Mallett.
    Mallett said overall, about 35 per cent of owners say their firms are
doing much or slightly better than one year ago, while 27 per cent say they
are doing somewhat or much worse. At the same time, about 44 per cent of
respondents expect stronger performance during the next three months, while
only 16 per cent expect a weakening. The longer-term expectations for the next
12 months are the most positive, with 51 per cent of respondents expecting
stronger performance, versus only 14 per cent expecting a weaker year ahead.
    Looking across the country, Mallett said businesses in British Columbia
and Alberta continue to be the most optimistic, and it appears some of that
confidence has spread to the adjacent prairie provinces, as the index for both
Manitoba and Saskatchewan are up. Businesses in Nova Scotia, and New Brunswick
also continue to show strong index growth, although it is worth noting that
the majority of responses were received before New Brunswick brought down its
budget, which contained significant tax increases for small corporations.
Business optimism in Ontario and Quebec has stabilized after gradually losing
steam over the past few years. The index in PEI fell slightly but is not far
off its average so far this decade, while businesses in Newfoundland and
Labrador are less optimistic. Their index dropped for the second consecutive
quarter.
    Mallett also noted that the index's sector detail reveals that
differences among industries are shrinking. "The industrial profile across the
country does not reveal any clearly lagging sectors - a sign of broad-based
stability."
    The increase in overall performance expectations is matched with a
corresponding rise in hiring plans, according to Mallett. Almost 32 per cent
of business owners expect to increase full-time employment in the next
12 months - more than a point above December's mark. Construction businesses,
manufacturing, wholesale and business services firms are the most likely to
increase staffing levels during the year ahead.
    When asked about factors affecting their businesses, Mallett said on the
positive side, more businesses report improving customer demand than declines.
Wage demands and labour availability are still a concern, but not to the same
extent as the previous quarter, while concerns related to energy prices are
back up, largely because of the latest spike in gasoline prices at the pump.
To a lesser extent, other input costs are also cited by businesses as a reason
for weakness in business conditions and concerns about insurance availability
and cost linger, but not nearly to the same degree as in the past couple of
years.
    "While the results are positive, it is fair to say the small business
economy is not yet running at full capacity, the way it was earlier this
decade," Mallett concluded. "Recent announcements at the Federal level to
encourage capital investment, reduce red tape and enhance capital gains rules
are all welcome developments, but the economic spark that would come from
other more stimulative government policy options, such as broad-based tax
cuts, remains elusive."
    The survey was conducted via fax and e-mail between March 6 and 17, 2007
and drew 1,920 responses.

    The full report is available on the CFIB web site at www.cfib.ca.

    Business Barometer is a quarterly publication of the Canadian Federation
of Independent Business and is a registered trademark.




For further information:

For further information: Holly Bennett or Gisele Lumsden at (416)
222-8022


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