Small business confidence down in May – lowest since November

But one-fifth plan to increase full-time staffing: CFIB

Confidence among Canada's small and medium-size businesses became more subdued in May, according to a survey of 795 members of the Canadian Federation of Independent Business (CFIB).

The Business Barometer index dropped a further 1.6 points after a 1.3 point decline in April, landing at 64.8 — its lowest reading since November. (Measured on a scale of zero to 100, an index level above 50 means owners expecting business performance to be stronger in the next year outnumber those expecting weaker performance.)

"For the most part, optimism in Canada is being kept in check by financial market jitters emanating from Europe," said Ted Mallett, CFIB's chief economist and vice-president. "Broadly speaking, however, most of the economic fundamentals are still a net positive. Most importantly, business plans for jobs and investment remain in growth territory."

Business owners in Alberta (72), Saskatchewan (72.2) and British Columbia (67.7) are the most optimistic in Canada. Conversely, optimism dropped significantly in Ontario (61.1) and Nova Scotia (59.5), bringing their index levels close to the 60-point mark, alongside Prince Edward Island (58.5) and Newfoundland and Labrador (60.0).

The remaining provinces: Quebec (63.3), New Brunswick (63.5) and Manitoba (63.5) are all about one point shy of the national average.

"Aside from natural resources and the health-services sector, which show a lot of confidence, business owner optimism in most industries remains tightly grouped in the low-to-mid 60s," said Mallett. "The overall drop in confidence can particularly be seen within the goods sectors — agriculture, manufacturing and construction — although retail and hospitality have held steady or made small gains."

There is some good news, said CFIB. One-fifth (21 per cent) of business owners plan to increase full-time staffing levels in the next three to four months, while only 10 per cent plan to cut back. Similarly, 40 per cent of business owners describe their state of business to be in good shape, which is almost three times the 14 per cent of owners that characterize the overall situation as bad.

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