Small business confidence dips in September

October 6, 2010   by PLANT STAFF

TORONTO: Optimism among Canada’s small- and medium-sized business owners continues to erode, but manufacturers are among those bucking the trend, according to a Canadian business index.

The Canadian Federation of Independent Business (CFIB) Business Barometer dropped to 63.6 in September from 64.9 in August, continuing a decline now four months in the making.

“The latest result suggests the economy is truly kicking into low gear,” said Ted Mallett, CFIB’s vice-president and chief economist.

Manufacturers moved a tiny bit ahead from August’s 64.5 reading to 64.7 in September. Other sectors showing gains were natural resources, agriculture and wholesaling. Construction showed the poorest performance, dropping from 59 to 51.6.

Of the provinces, Ontario made the biggest contribution to the declining national score, dropping six points to 54, bringing the province’s confidence to its lowest point since June 2009. Business owners in Newfoundland and Labrador are the most optimistic with an index score of 69.1 Those in New Brunswick, Quebec, Nova Scotia, Alberta and Saskatchewan are closely grouped in the 65 to 67 range.

CFIB says 12% of business owners plan to increase full-time staff levels in the next three to four months while 17% are planning cutbacks. Prices are expected to rise just 1.2% over the next year and wage growth will be held to 1.5%.

In a TD Economics bulletin, TD economist Francis Fong notes that despite the decline, the index is still well above the 50 level, indictating significantly more businesses are expecting a stronger performance in the coming year. He said at 63.6, the index is below the long-term trend, but way ahead of the 39.4 low recorded in December 2008, and simply implies a moderation in overall output growth.

“Indeed, this is consistent with our view that the Canadian economy will continue to grow, but at a more tepid pace relative to that posted at the end of 2009 and beginning of 2010,” he said.

According to past results, index levels normally range between 65 and 75 when the economy is growing. 

The September 2010 findings are based on 884 responses collected from a random sample of CFIB members.

Click for here for a pdf of the report.

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