Small business confidence dropped 11.7 points in May, falling to 46.3, finds the Monthly Business Barometer by the Canadian Federation of Independent Business (CFIB).
Measured on a scale between 0 and 100, an index below 50 means owners expecting their business’s performance to be weaker over the next three or 12 months outnumber those expecting stronger performance.
The long-term optimism index dropped significantly this month falling below the 50-point threshold. Every province and every sector posted a decline. Fuel costs remained the top pressure point, cited by nearly three quarters (72%) of small businesses. Weak consumer demand is still the lead cost constraint (53%), said the national organization which is Canada’s largest association of small and medium-sized businesses with 103,000 members across every industry and region.
“Many small firms are stuck in a grind. Demand is weak, costs−especially fuel- are high and conditions don’t show signs of improving. This environment is not conducive to strong orders or investment,” said Andreea Bourgeois, CFIB director of economics.
Average wage plans were unchanged at 2.4%, while businesses plan to raise prices by an average of 3.1% in the next few months, added the CFIB.
“This is not the direction we’d like to see this data point go. Higher oil prices add upward pressure on inflation, while tariffs and other economic challenges are still weighing on economic growth. With the next Bank of Canada interest rate decision only weeks away, it is a tough spot to be in. This is the second month we’ve seen price increase plans above 3%, and now we have to ask: is this the beginning of a new upward trend?” said Bourgeois.
Hiring intentions remain weak and below seasonal levels, with 14% of small firms looking to hire full-time in the next few months, noted the CFIB.
“While our governments don’t have control over global events, they can control what’s happening here at home. It’s important governments leverage domestic policies to boost our economy. Lowering taxes, reducing red tape and eliminating internal trade barriers are some of the ways to help small businesses weather the current challenges,” said Simon Gaudreault, CFIB chief economist and vice-president of research. “It’s in the moments like these that we can transform the nation by creating conditions that will outlast the current crisis and pay off in the long term.”
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