Many Small Businesses Anxious About 2023
Small businesses wrapped up 2022 with a mixed outlook, according to the latest Canadian Federation of Independent Business (CFIB) business barometer.
Despite ongoing challenges, business in December was back to where it was three years ago. Thirty-eight per cent of entrepreneurs now say their business is in good shape and 17 per cent describe their situation as bad, similar to December 2019.
“Although it is encouraging to see some things going back to normal, such as how entrepreneurs perceive the overall state of their business, we have to recall that recovery, especially on the financial side, remains elusive for too many,” says Simon Gaudreault, chief economist and vice-president of research at CFIB. “Our small business recovery dashboard shows 52 per cent still have below normal sales and 58 per cent carry outstanding pandemic debt for an average of more than $114,000.”
Other business barometer indicators also reflect the current mixed picture. Capacity utilization hovered around almost 80 per cent — a good level — in 2022, and supply chain indicators showed continuous improvement throughout the year.
Shortages of skilled or semi/unskilled labour eased up recently but they remain, currently affecting 49 per cent and 36 per cent of businesses, respectively. And various costs continue to cause difficulties for historically high shares of small businesses, including fuel and energy, insurance, wages, product inputs, borrowing, capital equipment and technology.
Meanwhile, the 12-month index — the main small business confidence indicator of the business barometer — registered 50.9 index points in December, a modest 0.9 increase over November. This is a level that remains quite low and is usually only visited around recession periods.
“Businesses have been through the wringer, so it’s not surprising they’re entering the new year with caution and anxiety,” says Gaudreault. “However, on the macro level, there may be some cause for optimism as we see some of the inflationary pressures continue their downward trend or at least somewhat settle in the last few months.”
Average 12-month price plans saw a small uptick to 4.1 per cent in December (they were at four per cent in November), while wage increase plans dropped to 2.9 per cent. Both are still historically high but have come down from their mid-2022 peaks.
“The post-holiday months are typically where businesses see a dip in activity so some of what we’re seeing is seasonal and expected. However, the fundamental situation for small businesses is far from rosy as they’re under a huge cost pressure, feeling the pinch of inflation and the burden of pandemic debt,” says Gaudreault. “Very high costs of doing business and a slowing economy are likely to challenge many businesses’ budgets and survival in the upcoming months.”