Business confidence rebounds in fourth quarter: CFIB

14 December 2005, Toronto – The latest Quarterly Business Barometer, by the Canadian Federation of Independent Business (CFIB), shows confidence returning to the small and mid-size business sector. The CFIB Quarterly Business Barometer Index now stands at 106.2 (1988=100), or three points above its September level. �This is still below the average levels recorded over the past four years, but it shows that the small- and medium-sized business economy is in growth mode,� Mallett said. The survey results also show that retailers are generally optimistic about the current holiday season, despite retail performance being mixed.

CFIB�s chief economist, Ted Mallett, says that about 40 per cent of all business owners report their firms are doing much better or slightly better than 12 months ago, while 27 per cent are doing somewhat or much worse. For the next three months, 30 per cent of owners say they expect much stronger and somewhat stronger performance and 23 per cent predict weaker results. Longer-term expectations are more positive, with 47 per cent of all business owners expecting improved performance for their firms in a year�s time, while 38 per cent expect their firms� performance to remain stable. The remaining 15 per cent expect a weakening in their businesses during 2006.

Coast to coast, the December results show a convergence of expectations. Businesses in Alberta and BC continue to be the most optimistic, although their indexes are at one- to two-year lows. Nova Scotia and Ontario businesses have expectations that generally mirror the national average. Results in the remaining provinces are slightly below the national average.

While the November-December sales period is traditionally slow for many businesses, it is critical for many retailers. The survey found that their expectations are, generally, on the rise even though their current performance is rather mediocre. Compared to last year, only 37 per cent of retailers say they are performing at a stronger level, while 32 per cent say performance is worse and the remaining 31 per cent say they are doing about the same.

The strongest retail performance this season has been for businesses carrying prescription drugs, sporting goods, home and garden supplies, home electronics, musical instruments, women�s clothing and household furniture. Results are not positive, however, for men�s clothing, gasoline, general merchandise, recreational vehicles, groceries and, perhaps surprisingly in the holiday season, jewellery.

�On the employment front, there is a strong increase in hiring plans,� Mallett said. �We found that almost a third of business owners now expect to increase full-time employment in the next 12 months. That�s just slightly less than the record high recorded in March.�

Stronger prospects for the coming year also mean that fewer business owners are expecting to cut back employment. Less than eight per cent of respondents expect to cut full-time jobs in the next 12 months. Part-time employment is expected to remain stable for 80 per cent of firms, decrease for six per cent and rise for 14 per cent. Firms in the business services and manufacturing sectors have the strongest plans for increasing employment. Agriculture and retail trade, which traditionally have the lowest job prospects, have also posted respectable employment growth expectation.

The most common difficulties faced by businesses continue to revolve around input prices, particularly energy costs. Insurance costs remain a significant concern. Interest rates have climbed since the fall, and there has been an increase in the number of business owners reporting more difficult access to bank financing, from 11 per cent in September to 18 per cent in December.

With employment needs still on the rise, labour shortages are showing no sign of easing. Attracting labour has become a greater need for many businesses and higher market wages are the result. More than 37 per cent of businesses expect to increase wages by more than 2 per cent in the next 12 months, and 24 per cent plan to increase them at 2 per cent.

The survey was conducted via fax and e-mail and November 21 2005 and drew 2,402 responses. The national results are accurate to within +/- 2.0 percentage points, 19 times out of 20.

Since 1971 the Canadian Federation of Independent Business (CFIB) has been giving small firms a big voice in the public arena. If you own and operate your own business and are looking for ways to help it prosper, then CFIB can be of service Visit