Quarterly Business Barometer - Small business confidence drops as temperature rises

    TORONTO, June 27 /CNW/ - The latest Business Barometer by the Canadian
Federation of Independent Business (CFIB) shows the index has fallen to 107.3
in June, from 108.7 in March, back to levels displayed for most of 2006. "The
June index level corresponds roughly with 2 to 3 per cent growth in the
economy - still a respectable and sustainable rate of change, but it's a
complicated picture. The economy is split along regional lines - west versus
east - and sectoral lines - services versus goods, presenting significant
challenges to the central bank and government policy makers," CFIB's chief
economist, Ted Mallett said.
    Overall, about 40 per cent of owners say their firms are doing much
better or somewhat better than one year ago, while 24 per cent say they are
doing somewhat or much worse. At the same time, about 42 per cent of
respondents expect stronger performance during the next three months. The
longer-term expectations for the next 12 months are the most positive, with 49
per cent of respondents expecting stronger performance.
    Looking across the country, Mallett said businesses in British Columbia
and Alberta continue to be the most optimistic, and the index for both
Manitoba and Saskatchewan are up for the second quarter this year. Business
owners in the rest of the country, however, paint a somewhat different
picture. Although not bleak, the economic environment in Ontario and eastward
is not up to previous norms, dropping three points from its March level to
104.3. Quebec businesses are somewhat more optimistic, at 105.8, while those
in New Brunswick lead the region at 108.8. The index in Newfoundland and
Labrador increased to 104.2. Businesses in Nova Scotia are not nearly as
optimistic. Their index dropped a full seven points in the quarter to 103.2,
while that of Prince Edward Island dropped to near the baseline level of 100.
    Mallett also noted that the index's sector detail reveal pretty sharp
contrasts. On the downside, business owners in the agriculture sector are
showing some surprising pessimism. Although commodity prices are high, it
appears that the high dollar and input prices are keeping a lid on future
performance expectations. For the same reasons, expectations among
manufacturing and transportation-related business owners are considerably
lower than those of the rest of the economy.
    When asked about factors affecting their businesses, Mallett said
business owners report customer demand is improving, on balance. On the other
side of the coin, however, is the concern over energy prices. More than 80 per
cent of owners say that these price shifts have caused problems for their
businesses, versus only two per cent who have been able to capitalize on them.
Many other businesses have reported various factors that continue to present
challenges, including: input prices, insurance, labour availability, wage
demands, interest rates and general competition. Border issues remain
significant for those that conduct business in the US.
    Employment expectations remain reasonably upbeat, according to Mallett,
with almost 30 per cent of business owners expected to increase full-time
employment in the next 12 months - slightly lower than the 32 per cent in
March 2007.
    "While the economy as a whole appears to be growing at a modest pace, the
more pronounced east/west and goods/services extremes are of concern," Mallett
concluded. "The high dollar is pinching agri-businesses and manufacturers,
disrupting their ability to contribute to economic growth. On the positive
side, generally healthy employment markets continue to add to jobs and wages,
keeping consumer wallets full."

    The survey was conducted via fax and e-mail between June 4 and 15, 2007
and drew 1,836 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)

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