Business confidence index drops due to fuel price concerns; Insurance remains a concern: CFIB

  • Business confidence index drops due to fuel price concerns.
  • Alberta, BC remain strong, optimism in Atlantic Canada remains low.

Toronto, September 28, 2005 – Results of the latest quarterly survey of small- and medium-sized enterprises, by the Canadian Federation of Independent Business (CFIB), show that business confidence took another tumble in September–largely as a result of rising fuel prices. CFIB�s chief economist and vice-president of Research, Ted Mallett, stated that 88 per cent of independent business owners across the country find energy prices are a major cause of concern.

�The drop in optimism we see in this quarter is likely temporary, but recovery will depend on the future path of fuel costs,� said Mallett.

The CFIB Quarterly Business Barometer Index now stands at 103.0 (1988=100), fully four points lower than the previous June index level of 107.0 and almost seven points below the previous peak of 109.8 registered in March 2005.

Overall, 39 per cent of all business owners say their firms are doing much better or slightly better than one year ago, while 27 per cent say they are doing somewhat or much worse. However, longer-term expectations are more positive, with 42 per cent of business owners expecting stronger performance during the next 12 months with only 20 percent expecting a weakening of their performance over the next 12 months.

Regarding the provinces, Mallett said the September 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 the Maritimes displayed sharply lower optimism compared to previous surveys, with Newfoundland showing the most optimism of the four Atlantic Provinces. For the second quarter in a row optimism is down in central Canada, and particularly in Quebec.

On the employment front, Mallett said hiring plans are holding steady in September with 26 per cent of business owners planning to increase full-time employment over the next year. According to Mallett, firms with the strongest full-time employment plans are in business services, manufacturing and financial sectors, while businesses in the agriculture and retail and the hospitality sectors have the lowest levels of planned employment growth.

Mallett said, among the ten broadly based sector groupings, the business services sector along with health and education–the industries perhaps least directly impacted by fuel prices–are the only sectors where expectations remain generally unscathed. The remaining eight sector indices all declined. Most notably, transport, agriculture and retail sectors showed the biggest declines as high fuel prices wrought havoc with profit margins and business plans.

Mallett also commented that, apart from fuel prices, insurance premiums were cited as problematic for 61 per cent of respondents, signalling the still-pressing need to address insurance market distortions.

Mallett concluded by saying business confidence is affected by many factors. �While inflationary pressures have increased somewhat, employment plans do not appear to have been harmed. Whether that remains the case depends very much on what happens with energy prices in the months ahead.�

The survey was conducted among a stratified sample of CFIB members between September 6-September 16, 2005, and drew 2,419 responses. The national results are accurate to within +/- 2 percentage points, 19 times out of 20.

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