CFIB Survey: Business confidence index drops after three consecutive quarters of gains

June 29, 2005 – Toronto, Canada – Results of the latest quarterly survey of small- and medium-sized enterprises, by the Canadian Federation of Independent Business (CFIB), show a dip in business confidence in June. This is first decline following three consecutive quarterly gains.

The CFIB Quarterly Business Barometer Index now stands at 107.0 (1988=100), below the March level of 109.8. According to CFIB chief economist Ted Mallett, although the current index level cannot be considered among the economic low points in the recent past, it is below what would indicate robust business sector performance.

41 per cent of all business owners say their firms are doing much or slightly better than 12 months ago, while 25 per cent report they are doing somewhat or much worse than 12 months ago. However, longer-term expectations are much more positive, with nearly half of all business owners (49 per cent) expecting improved performance for their firms a year from now, while 36 per cent expect no change to their firms’ performance. The remaining 15 per cent expect a weakening in their businesses over the next 12 months.

Regarding the provinces, Mallett said the June results show a tale of two regions. On the one hand, businesses in Alberta and BC continue to lead the nation in optimism. On the other, businesses in Atlantic Canada displayed sharply lower optimism compared to the previous survey. Indexes in all four Atlantic provinces are lower than at any time since late 2001. Optimism is also down in both Ontario and Quebec, but to a smaller degree.

On the employment front, Mallett said hiring plans dropped considerably over March of this year, with 26 per cent of business owners planning to increase full-time employment over the next year, down from 33 per cent, while only 9 per cent foresee reducing employment levels in the next 12 months. According to Mallett, firms with the strongest full-time employment plans are in business services, manufacturing and wholesale trade, while businesses in the agriculture and retail sectors have the lowest levels of planned employment growth, down from more optimistic results in March.

Mallett also commented that survey findings show that energy prices are the major cause of problems for eight out of ten business owners across the country, insurance premiums were cited as problematic for 61 per cent of respondents.

Mallett said, among the 10 broadly based sector groupings, only two– wholesale trade and agriculture-garnered increases in expectations while all eight other sectors displayed modest or significant declines in their index levels compared to last quarter. Most notably, the transport and hospitality sectors showed significant declines in optimism, as did the financial services and social services sectors.

Mallett concluded by saying business confidence is affected by many factors. “The political uncertainty we’ve seen in the last few months, and the generally toxic climate in Ottawa these days, can’t be helping.”

The survey was conducted among a stratified sample of CFIB members between June 7 and 18 of 2005, and drew 2,399 responses. The national results are accurate to within +/- 2 percentage points, 19 times out of 20.

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