Business Barometer: Small biz optimism up but uncertain in January

Small business optimism picked up a little in January, but the tectonic shifts in their perspectives are still very much on display. CFIB’s January Business Barometer® Index rose about a point and a half to 63.5--but only from relative optimism gains in 3 of 10 provinces.

Rising sentiment was centred in Prince Edward Island (69.8), Ontario (67.8) and Nova Scotia (64.9). Although optimism fell off everywhere else, the epicentre was in Alberta where the index plunged more than 11 points to 54.8. Losses of between two and four points were noted in Newfoundland and Labrador (60.3), Manitoba (57.1) and Quebec (56.3), while sentiment declined only slightly in Saskatchewan (55.1), New Brunswick (64.1) and nation-leading British Columbia (71.7).

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.

Still, owners who say their businesses are currently in good shape outnumber those who say the opposite by a margin of more than four to one. Spring hiring plans are showing the normal seasonal up-cycle pattern, however, they are a little less positive than what we had seen in Januarys of the past two years.

More significant though, is a clear interruption in capital investment plans as business owners try to sort out their strategies for moving forward. There are signs of improved segment spending on vehicles and production equipment, but only 55 per cent of owners are planning to make any capital expenditures in the next 12 months--a post-recession low. Concerns about customer demand and working capital have also spiked upward, reflecting a general questioning of potential operating environments in coming months.

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