Business confidence remains steady in 2nd quarter, 2006: CFIB

Toronto – June 28, 2006 – Results of the latest quarterly survey of small- and medium-sized enterprises, by the Canadian Federation of Independent Business (CFIB) show that business confidence remains steady. The CFIB Quarterly Business Barometer Index stands at 107.2 (1988=100), identical to levels registered in the March index.

“This pace of activity is in the mid-range of expectations measured in the past five years, so it bodes well for good, but not spectacular, growth in the economy,” said CFIB’s chief economist, Ted Mallett.

Overall, 42 per cent of all business owners say their firms are doing much better or slightly better than one year ago, while 25 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 three months, while only 15 per cent expect a weakening.

Regarding the provinces, Mallett said the June results show a tale of two regions. In the West, businesses in Alberta lead the nation in optimism, with a new record level index of 121.5 – more than 14 points above the national average. BC also remains well above the national average at 115.4 and even Saskatchewan, which has traditionally been the region with the lowest levels of business optimism, registered its own provincial index record of 106.6 – identical to Manitoba.

Elsewhere it’s a somewhat different story. Businesses in the Atlantic Provinces continue to display somewhat cooler optimism, with New Brunswick showing the most optimism of the four provinces. Alarmingly, Ontario and Quebec continue to remain much cooler than Alberta and BC for the eighth quarter in a row.

“The worst part is that Quebec and Ontario respondents’ long-term views of their business prospects continue to trend downward,” said Mallett. “The truth is that the torrid economy in Alberta is masking building weakness in central and eastern Canada.”

On the employment front, Mallett said, although still within historical norms, full-time hiring plans are down slightly with 29 per cent of business owners expecting to increase full-time employment in the next 12 months – somewhat below the 33 per cent who had the same perspective in December 2005. According to Mallett, confidence in the goods-producing and distribution industries, such as manufacturing, construction, transportation and wholesaling, lost momentum in June. In contrast, business optimism has grown in business services and on the consumer side of the economy. Both retail and hospitality sector businesses display levels of confidence that, while not at record levels, nonetheless point to healthy growth.

Mallett said the rising value of the Canadian dollar undoubtedly had a bearing on business confidence among sectors and regions. “Overall, about one-third of business owners would prefer to be dealing with a lower-value loonie, while about one-in-six would like to see it go higher,” he said. “The other 50 per cent or so of businesses owners say they are not directly or significantly affected by the value of the Canadian dollar.”

When asked about factors affecting their businesses, Mallett said that concerns related to input prices continue to be stubbornly high among respondents. Energy prices are still by far the biggest problem, cited by 84 per cent. High insurance premiums remain among the biggest factors affecting business performance, with more than 50 per cent saying they are getting worsening value for money on premiums. He said the shortage of qualified labour, and the associated wage pressures, are also growing concerns for business owners.

Mallett concluded by saying that while small- and medium-sized business expectations have stayed steady nationally, the growing regional disparities are creating challenges for government and monetary policymakers to contain a boom in one region while supporting growth policies in others. “How they handle this challenge will have a significant impact on the confidence of our country’s entrepreneurs in the months ahead.”

This survey was conducted among a stratified sample of CFIB members between June 6 and June 17, 2006, and drew 2,371 responses. The national results are accurate to within +/- 2.1 percentage points, 19 times out of 20.

About CFIB

CFIB works on behalf of more than 100,000 independent business owners in every sector and region in Canada. Taking our direction from CFIB Members, through regular surveys, we lobby for small- and medium-sized businesses at the federal, provincial and local levels of government.