Business confidence index on the rise in December: CFIB Quarterly Survey

  • Current holiday season strong for independent retailers
  • High Canadian Dollar has mixed impact on small business results

December 15, 2004 – Toronto � Results of the latest quarterly survey of small- and medium-sized enterprises, by the Canadian Federation of Independent Business (CFIB), show a rise in business confidence in December. This follows a previous gain in September, and recovers most of the ground lost in previous quarters this year. In addition, the new results show that retailers are optimistic about the current holiday season, with three out of five business owners saying performance is the same or stronger than it was at same time last year.

According to CFIB chief economist Ted Mallett, about 42 per cent of all business owners say their firms are doing much or slightly better than 12 months ago, while 23 per cent report they are doing somewhat or much worse. For the next three months, 32 per cent of owners say they expect much stronger and somewhat stronger performance, 47 per cent expect things to remain the same, and 20 per cent foresee weaker results. Longer-term expectations are much more positive, with half of all business owners (50 per cent) expecting improved performance for their firms a year from now, while 37 per cent expect no change to their firms� performance; the remaining 13 per cent expect a weakening in their businesses over the next 12 months.

As a result, the CFIB Quarterly Business Barometer Index now stands at 108.4 (1988=100) above the September level of 107.5, but still below the 109.9 level of the same time last year. �More businesses are doing well than in the previous 12-month business year,� said Mallett. �The results show a healthy overall growth for the Canadian economy.�

The survey finds that the high Canadian Dollar is having a mixed impact on small businesses. Close to 31 per cent of business owners surveyed say they would prefer a lower Canadian dollar, while 19 per cent think they would be better off with a higher dollar. The remaining 50 per cent of business owners say they are not affected by the value of the dollar. Mallett noted that those who import from the US would see the biggest benefits to the dollar�s rise, while those who export would experience more difficulties.

Mallett also said the current holiday season is looking positive for independent retailers, with 43 per cent of respondents saying sales are stronger than the same time last year, while 30 per cent say there is no change, and 27 per cent say sales are below the levels of 12 months ago. He said pharmacies, as well as stores selling hardware, auto parts, general merchandise, music, and clothing are among the businesses that are doing better this holiday season. On the other hand, businesses that sell books, toys, gasoline, home furnishings and cars are not performing as well.

Mallett said survey findings also show that the most optimistic sectors for the next 12 months are barbershops and beauty salons, computer and other business services as well as management consulting and equipment rentals, while the least optimistic are crop and livestock farms, gas stations, and hotels and motels.

In commenting on other survey findings, Mallett said the new results point to some changes in optimism levels across regions, compared to the previous quarter. He said in December Alberta placed first in optimism for the first time since 2001, followed closely by British Columbia now in second place. He said that Nova Scotia, PEI, Manitoba and New Brunswick improved somewhat during the quarter, but he commented that Saskatchewan, while also showing some gains, remains at the bottom of the pack, well below the national index. He noted that in addition to British Columbia, optimism levels have also dropped somewhat in Qu�bec compared to previous results, while they remained steady in Ontario and Newfoundland-and-Labrador.

On the employment front, Mallett said hiring plans have improved, with more than 30 per cent of business owners planning to increase full-time employment over the next year, while 14 per cent of owners plan to increase part-time employment levels. According to Mallett, firms with the strongest full-time employment plans over the next 12 months are in business services, manufacturing, construction and financial services, while businesses in agriculture, retail and health/education are least likely to increase their staffing levels during the next year.

Mallet also commented that survey findings show that input prices, particularly energy and insurance costs, continue to cause problems to four out five business owners across the country.

The survey was conducted between November 22 and December 3 of 2004, and drew 2,883 responses. The national results are accurate to within +/- 1.8 percentage points, 19 times out of 20.