Small Business Confidence Drops

Despite the decline, 22% plan to hire in the next quarter

Written by Kim Hart Macneill

Optimism among owners of SMEs fell last month, according to the Canadian Federation of Independent Business.

November’s Business Barometer index fell 2.7 points to 62.9, after an upswing in September and October. This is a step backward, says Ted Mallet, CFIB’s Toronto-based chief economist and vice president, but the index is still above the lowest levels of the year. The August level was 60, on par with July 2009.

“Since that time we’ve seen a bit of a perk up in optimism, but it hasn’t come back to the levels that we generally see during a normal growth segment of the business cycle,” says Mallett. “It’s still performing under potential, and we think the GDP numbers that come out over the next couple of months will echo that.”

SME owners in Newfoundland and Labrador marked their third straight month as the most confident in the country, at 74.1. Levels in BC (67.1), Alberta (68.3), Saskatchewan (66.4) and Ontario (63) remained above the national average. Prince Edward Island (52.1) posted the lowest levels in the country.

Mallett attributes much of the national decline to unusually low confidence levels in the natural resources, manufacturing and business-services sectors.

Despite the ripple, the index’s employment numbers are at a post-recession peak, with 22% of SMEs planning to hire within the next three or four months. Only 13% said they would cut back on their workforce.

“The fact that small firms are highlighting a shortage of qualified labour as one of their major concerns and saying that they really want to hire employees over the next couple of months suggests that there is some forward optimism there,” says Mallett.

Overall, 40% of respondents described their business as being in “good” shape, while 12% said the state of their business is “bad.”

The index is measured on a scale of 0 to 100. A level above 50 indicates that owners expecting stronger business performance in the next year outnumber those expecting weaker performance. It usually ranges between 65 and 70 when the economy is growing at its potential. The latest findings are based on 981 responses collected from a stratified random sample of CFIB members through an online survey.

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