Small and mid-sized businesses (SMEs) were a little less optimistic in April than they were in March, but manufacturers lead as the most confident, according to the CFIB Business Barometer Index.
TORONTO: Small and mid-sized businesses (SMEs) were a little less optimistic in April than they were in March, but manufacturers lead as the most confident, according to the CFIB Business Barometer Index.
The 1.3-point drop to 66.4 eroded most of the big gains seen in the March survey findings, the first decline registered in the Index since August 2011, when international financial markets seriously rattled economic confidence.
“For the most part, overall survey findings still point to stable business conditions and a modestly growing economy,” said Ted Malett, chief economist and vice-president for Canadian Federation of Independent Business (CFIB). “The outlooks for business owners both by sector and by region show very little relative change in April, which is also another sign of general stability.”
He said manufacturers remain the most positive by a significant amount, noting confidence in the natural resources industries, business services and the health and education sectors are also above the average. Those in personal services and hospitality are at the low end of the index – around the 60 mark.
Manufacturers with a 74.5 rating are well ahead of natural resources (69.8), retail (65.8), transportation (65.5) and wholesale (65.2).
Eighty-six per cent of SME manufacturers said business conditions were good or satisfactory in April. Insufficient domestic demand was the chief complaint (48%) followed by foreign competition (33%) and skilled labour shortages (33%). Fuel and energy were the main cost pressures for 77% followed by wages (45%).
Thirty per cent reported employment was up compared to 7% who reported a decline.
Business owners in Alberta (73.3) and Saskatchewan (72.1) were the most optimistic in the country. A surge of optimism in Ontario in March was partially corrected in April to 67.1. Business sentiment in New Brunswick (68.0), BC (66.9), Newfoundland and Labrador (61.9) and PEI (62.2) improved. Optimism, however, fell back markedly in Manitoba to 65.2, while also dropping slightly in Nova Scotia (63.0) and Quebec (63.9).
CFIB reports hiring plans were positive in April with 21% of business owners planning to increase full-time position over the next three or four months, while only 12% plan to reduce them.
“Increased confidence in hiring is certainly strongly influenced by seasonal factors. The good news is that when compared to the results from this time last year, they are better than in April 2011,” said Mallett.
TD Economics said less business optimism in April is largely consistent with a number of new emerging risks, such as elevated crude oil prices and increased focus on Spain’s government debt.
“Nonetheless, it’s important to note the drop in confidence comes on the heels of eight months of consecutive gains, and one month does not make a trend. In addition, the level of confidence is largely consistent with an economy growing near trend,” said TD economist Diana Petramala. “More importantly, businesses continue to see sales growth accelerating in the coming months, which will help generate hiring and business investment- two key drivers of economic growth.”
She said the report supports TD’s view that the Canadian economy will continue to grow at a healthy (albeit not great) rate of 2% to 2.5% over 2012.
Measured on a scale between 0 and 100, an index level above 50 means owners expecting their businesses’ performance to be stronger in the next year outnumber those expecting weaker performance. Past results indicate index levels normally range between 65 and 75 when the economy is growing.
The April findings are based on 807 responses, collected from a stratified random sample of CFIB members, to a controlled-access web survey. Findings are statistically accurate to +/- 3.4 per cent 19 times in 20.
Click here to access the report.