In its May Business Barometer, the Canadian Federation of Independent Business (CFIB) revealed that the long-term confidence index for small businesses fell sharply by 11.7 points to 46.3 points, below the 50-point threshold.
“Many small firms are stuck in a grind,” said Andreea Bourgeois, CFIB director of economics, in a media release.
CFIB reported a drop in small business optimism this month across all provinces and sectors.
“Higher oil prices add upward pressure on inflation, while tariffs and other economic challenges are still weighing on economic growth,” Bourgeois said. “With the next Bank of Canada interest rate decision only weeks away, it is a tough spot to be in.”
Among small business owners surveyed for CFIB’s latest Business Barometer, fuel costs were still the most significant source of pressure (72 percent), while weak consumer demand remained the top cost constraint (53 percent).
“Demand is weak, costs - especially fuel - are high, and conditions don’t show signs of improving,” Bourgeois said. “This environment is not conducive to strong orders or investment.”
CFIB’s most recent Business Barometer recorded average price increase plans at 3.1 percent and average wage increase plans at 2.4 percent.
“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?” Bourgeois said.
CFIB revealed that hiring plans were still weak and below seasonal levels. Of small business owners polled, 14 percent intended to hire full-time in the coming months.
For its latest Business Barometer, CFIB received 563 responses from a stratified random sample of members to a controlled-access web survey that ran from May 5–12.
On a scale of 0–100, an index under 50 indicates that small business owners who expect a weaker performance over the next three or 12 months surpass those who expect a stronger performance.
Possible government action
“While our governments don’t have control over global events, they can control what’s happening here at home,” said Simon Gaudreault, CFIB chief economist and vice president of research, in the media release. “It’s important governments leverage domestic policies to boost our economy.”
According to Gaudreault, Canada’s governments can consider decreasing taxes, easing red tape, and removing internal trade restrictions if they wish to help small businesses navigate their present troubles.
“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,” Gaudreault said.