Business Barometer: small biz confidence remains cool in May

Canada’s small business confidence remained cool in May, sitting essentially unchanged from April’s readings. The Business Barometer® Index was 60.6 this month, versus 60.5 previously. Detail by province and by industry sector also showed little movement.

Business owners are least optimistic in Alberta, where index levels dropped slightly to 45.7. Although still well under last year’s levels, the index in Saskatchewan posted a slight improvement to 51.3. Businesses in British Columbia are still in the best state nationwide, with their index rising again to 73.5. Slight improvements were also seen this month in Ontario (63.2) and Manitoba (62.0). Businesses registered little change to index levels in Prince Edward Island (69.4) and Nova Scotia (63.4), while those in Quebec (56.6), Newfoundland & Labrador (56.9) and New Brunswick (58.9) saw theirs drop off a point or so.

It is no surprise that businesses in the resources sector are the least optimistic, but those in manufacturing, retail and financial services are also underperforming compared to the average.

On a scale between 0 and 100, an index above 50 means owners expecting their business’ performance to be stronger in the next year outnumber those expecting weaker performance. One normally sees an index level of between 65 and 70 when the economy is growing at its potential.

Forty-two per cent of business owners say their firms are in good shape, an improvement of three points over last month, but hiring plans flagged in May, with only 21 per cent of owners expecting to hire full-time staff in the coming few months. Capital spending intentions, although proving to remain fairly stable through the business cycle, are low compared to past norms. The stabilizing Dollar, however, brought a halt to the acceleration of pricing plans as a result of higher import costs. Year-ahead pricing plans are now back to plus-1.7 per cent, in line with 2014 readings.

The full report, prepared by Ted Mallett, CFIB Vice-President & Chief Economist, is available on the CFIB website.