Bad news in the first half of August soured small business confidence, according to the results of a monthly index tracked by the Canadian Federation of Independent Business (CFIB).
TORONTO: Bad news in the first half of August soured small business confidence, according to the results of a monthly index tracked by the Canadian Federation of Independent Business (CFIB).
It’s Business Barometer Index dropped to 61.7 from its July level of 68.3 – the lowest reading since July 2009.
“The raucous debt ceiling debate in the US and turmoil that followed in equity markets worldwide rightly caused business owners to pay attention to their own planning. But of note, although confidence suffered, owners’ views of actual current business conditions held up reasonably well,” said Ted Mallett, vice-president and chief economist for CFIB.
TD Economics economist Shahrzad Mobasher Fard notes in a report that the results show the level of the index “is still consistent with modest growth over the coming quarters.”
The index shows the balance of opinion on how businesses are now doing compared to three months ago is still trending upward, net positive and in line with survey results this time last year despite an expected drop over the next three months.
New orders, unsold inventories and use of staff overtime all pulled back in August, but CFIB sees this as a correction of strong July measures, and they exceed levels through the 2009 recession and the early stages of recovery.
“The drop in confidence is having a predictable impact on capital spending intentions, as more business owners decide to postpone investment decisions on vehicles, equipment and real estate,” said Mallet. “However, spending of this type generally has short lead-times compared to capital investment in larger enterprises, so it would respond positively and quickly in the event of signs of greater economic stability.”
August 2011 findings are based on 957 responses, collected from CFIB members and are statistically accurate to +/- 3.2% 19 times in 20
Here are some highlights:
• Confidence weakened the most within construction, manufacturing (59.8) and transportation but to a lesser extent among retail businesses. Confidence was greatest among service industries (high 60s) and natural resources (64).
• 12% of SMEs plan to employ additional full-time staff in the next three to four months, which is offset by the 14% are planning to cut staff, similar to August 2010.
• The largest provincial declines were in Ontario (-8) and Quebec (-5), settling near 60. Optimism is higher in Alberta (75), followed by Saskatchewan (69.1), and BC, Manitoba and Newfoundland-Labrador at 65.
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