CFIB: Small business outlook for 2007 suggest steady economic performance; Retailers upbeat this holiday season

December 13, 2006, Toronto � After a brief boost in optimism in the third quarter, the latest Quarterly Business Barometer by the Canadian Federation of Independent Business (CFIB) shows small- and medium-sized business confidence returning to its previous level. The CFIB Quarterly Business Barometer ® Index now stands at 107.0 (1988=100), more than a point and half below its September level, but very much in line with the levels posted between December 2005 and June 2006. �These readings suggest steady but unspectacular performance in the economy,� CFIB�s chief economist Ted Mallett said. The survey results also show that retailers are generally optimistic about the current holiday season.

Mallett says that about 43 per cent of all business owners report their firms are doing much better or slightly better than 12 months ago, while only 23 per cent are doing somewhat or much worse. 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 39 per cent expect their firms� performance to remain stable. The remaining 14 per cent expect a weakening in their businesses during 2007.

Coast to coast, the December results show a convergence of expectations. Businesses in Alberta and BC continue to be the most optimistic, despite a sharp downward correction in their indexes. Nova Scotia and New Brunswick are in third and fourth place, with optimism levels above the national average, while Saskatchewan and Manitoba remain close to their historical highs. PEI�s results are about average for the past five years, while those in Newfoundland and Labrador are better than most of their quarterly results for the past two years. Business optimism in Ontario and Quebec has been slowly but steadily losing ground during the past four years and the December results are no exception.

With respect to the critical November-December sales period for retailers, the survey found that their expectations are, if not grandiose, reasonably good. Compared to last year, 42 per cent of retailers say they are performing at a stronger level, while 25 per cent say performance is worse and the remaining 33 per cent say they are doing about the same. The strongest retail performance this season has been for businesses carrying general clothing, shoes, sporting goods and auto accessories. Results are not as positive, however, for women�s clothing, books, home furnishings and, perhaps surprisingly in the holiday season, jewellery. These retailers are hoping the last-minute shoppers surge will go their way.

�On the employment front, we found that almost a third of business owners now expect to increase full-time employment in the next 12 months, and that prospects for 2007 are strong enough that only 7 per cent of business owners foresee needing to cut back their full-time staff,� said Mallett.

Looking at the factors that affect a firm�s bottom line, the past three months saw a marked improvement in the effects of energy prices on business, while insurance premiums, interest rates and stock market levels also moved in a positive direction. On the other hand, businesses are feeling a tighter pinch from labour markets and growing wage demands.

The survey was conducted via fax and e-mail between November 21 and December 1, 2006 and drew 1,881 responses. The national results are accurate to within +/- 2.0 percentage points, 19 times out of 20.

For further information contact Judy Langford or Gisele Lumsden at (416) 222-8022 (or via e-mail judy.langford@cfib-fcei.ca or gislum@cfibmail.com)

The full report is available on the CFIB web site at www.cfib.ca

Business Barometer is a registered trademark of the Canadian Federation of Independent Business