Canadian Small Business Confidence Remains Low

Small business confidence saw virtually no change in June, with the Canadian Federation of Independent Business (CFIB) reporting the index remained below the 50-point mark for the second month in a row.

“Although early signs from abroad suggest the worst of the fuel shock may be behind us, many consumers and businesses remain under strain and the outlook remains uncertain,” says Simon Gaudreault, CFIB chief economist and vice-president of research. “We see this month marks a low point for confidence heading into summer but we hope it will rebound in the upcoming months, though important challenges remain.”

Price plans have held near the three per cent mark since April — at the upper end of the Bank of Canada’s inflation target range.

Hiring plans remained muted, with 12 per cent and 11 per cent of small firms planning to hire full-time and part-time staff, respectively, over the next three months.

Fuel costs are still the top constraint for 66 per cent of small businesses, while weak demand continues to weigh on more than half of small businesses. Meanwhile, the share of businesses reporting challenges with capital equipment and technology costs has steadily climbed over the past two and a half years, reaching 38 per cent of small firms.

“Businesses are being squeezed from all sides, including by rising input and occupancy costs, with the shares of affected firms on track to nearly double historical norms,” says CFIB senior economist Laure-Anna Bomal. “At the same time, their capacity to absorb higher costs is limited and recent years have taken a toll on overall business health, reflected in a net share of just 18 per cent of firms now reporting they are in a good general situation.”