'No summer lift for business confidence,' says separate report
Canada’s small business owners are feeling a bit better about the future, but not by much, according to a survey from the Canadian Federation of Independent Business (CFIB).
The July report shows the long-term confidence index at 50.9—just above the breakeven mark of 50, and still below the historical average seen before June 2022.
“The economy is stabilizing in some ways, and the direction we’re heading in is more encouraging. We’re not in the worst spot compared to previous months, but there’s still not a lot of optimism out there,” said Simon Gaudreault, CFIB’s chief economist and vice-president of research.
Measured on a scale between 0 and 100, an index above 50 means owners expecting their business’s performance to be weaker over the next three or 12 months outnumber those expecting stronger performance.
Business confidence stagnant
Business confidence among Canadian companies is still stuck in a rut, according to the latest numbers from the Conference Board of Canada. The group’s Index of Business Confidence slipped another 1.5 points to 63 this quarter—its lowest point outside of the pandemic era.
The survey, which ran from late June to mid-July, mostly wrapped up before U.S. President Donald Trump’s July 10 announcement about a possible 35 per cent tariff on Canadian goods.
“The drop in confidence was largely driven by a 5.0-percentage point increase in firms operating below optimal capacity and a 3.0-percentage point increase in those seeing it as an inferior time to expand,” said the Conference Board.
Most businesses expect things to stay the same or even get a bit worse, with almost 85 per cent of executives predicting steady or declining conditions over the next six months.
Canada’s job market rebounded in June, posting its first significant employment increase since January. The country added 83,000 jobs, a 0.4% uptick, nudging the employment rate up to 60.9% says Statistics Canada.
Hiring plans lagging amid slight wage increases
Hiring plans aren’t looking great either. While summer usually brings a hiring boost, more small businesses are thinking about layoffs (16% in July, up from 13% in June), according to the CFIB survey.
Only 12% of owners plan to hire, down from 15% last month, finds the survey of 719 CFIB members.
And running a business isn’t getting any easier—68% of small firms say taxes and regulatory costs are a major headache, and more than half (54%) point to weak demand as their biggest hurdle.
“Business owners tell us they’re dealing with trade and economic uncertainty, increased costs, and difficulty keeping up with taxes and regulations. Having long-term clarity would mean a great deal to small businesses right now,” said Andreea Bourgeois, CFIB director of economics.
Inflation is easing up a bit, with small businesses planning to bump prices by an average of 2.7% and wages by 2.1%.
While uncertainty from the U.S. administration is still a concern, said Gaudreault, “many announcements have not materialized in effective tariffs yet and it seems many business owners have started adjusting to the new trade reality, which might explain why they’ve regained some optimism.”
Investment still on hold
Investment plans are also on the back burner, finds the Conference Board. Fewer than half of businesses expect to boost capital spending in the next half-year, a trend that’s held steady since late 2022.
“The share of firms planning on increasing capital spending over the next six months fell for the second quarter in a row and has remained below 50 per cent since late 2022.”
On top of that, nearly 40 per cent of companies say their investment returns are falling short of what they hoped for.
There’s a bit of good news on the price front: “In this survey, 68.4 per cent of businesses expect Canadian prices to rise at an annual rate of 3 per cent or less over the next six months—a double-digit increase from the previous survey.”
Ontario remains the most popular spot for new investment, with the Prairies seeing a boost too, says the Conference Board.
But weak market demand is back as a top worry for business owners, with more than half naming it as their main barrier to investing. Trade tensions aren’t helping, either.
With the U.S. threatening new tariffs, 39 per cent of companies say these trade issues are affecting their investment plans, while another 22 per cent aren’t sure what to expect.
