Business Barometer: Small business sentiment nosedived in December

CFIB’s Business Barometer® Index fell 7.6 points from November's lacklustre reading to hit 53.6 this month--a two-and-a-half year low. Concerns were most likely brought on by low export prices for domestic oil and fears of what that would mean throughout the supply chain. These prices are volatile and the worst of the effects may be transitory, but the cascading impacts of the 2014-16 price crunch and its broad impact on the economy is fresh in business owners' minds.

Alberta business owners saw the largest deterioration in confidence, with their index dropping to 45.1--weakest in the country. Declines of more than three points were also noted in New Brunswick (62.5), British Columbia (60.1), Ontario (59.1) and Newfoundland & Labrador (48.4). There were improvements in Saskatchewan (51.6) and Nova Scotia (57.0) in December, but not enough to offset weaker performance in earlier months. There was relatively little movement in Quebec (61.8) and Prince Edward Island (67.9), but they too are off levels seen earlier in the year.

The industry picture, however, was more emphatic, with sentiment falling in 12 of 13 sectors this month. Declines were led by professional services, wholesale, finance and retail.

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.

Other performance indicators covered in the survey also beat a retreat in December. Full-time hiring plans turned net-negative, with 18 per cent of owners planning to cut back on staffing levels versus only 16 per cent who plan to add. Order books and accounts receivables also weakened, while the percentage of owners who said their businesses were in weak shape rose to 15 per cent.

This report was prepared by Ted Mallett, CFIB Vice-president & Chief Economist.