Small business confidence makes solid gain in first quarter of 2007: CFIB

Toronto � The latest Business Barometer by the Canadian Federation of Independent Business (CFIB) shows a solid gain in confidence within Canada�s small and mid-size business sector. The CFIB Business Barometer Index now stands at 108.7 (1988=100), up from 107.0 in December. �This brings the index back up into its historic mid-range � which corresponds with a sustainable 2.5 to 3.0 per cent growth rate in Canada�s GDP,� said CFIB�s chief economist, Ted Mallett.

Mallett said overall, about 35 per cent of owners say their firms are doing much or slightly better than one year ago, while 27 per cent say they are doing somewhat or much worse. At the same time, about 44 per cent of respondents expect stronger performance during the next three months, while only 16 per cent expect a weakening. The longer-term expectations for the next 12 months are the most positive, with 51 per cent of respondents expecting stronger performance, versus only 14 per cent expecting a weaker year ahead.

Looking across the country, Mallett said businesses in British Columbia and Alberta continue to be the most optimistic, and it appears some of that confidence has spread to the adjacent prairie provinces, as the index for both Manitoba and Saskatchewan are up. Businesses in Nova Scotia, and New Brunswick also continue to show strong index growth, although it is worth noting that the majority of responses were received before New Brunswick brought down its budget, which contained significant tax increases for small corporations. Business optimism in Ontario and Quebec has stabilized after gradually losing steam over the past few years. The index in PEI fell slightly but is not far off its average so far this decade, while businesses in Newfoundland and Labrador are less optimistic. Their index dropped for the second consecutive quarter.

Mallett also noted that the index�s sector detail reveals that differences among industries are shrinking. �The industrial profile across the country does not reveal any clearly lagging sectors � a sign of broad-based stability.�

The increase in overall performance expectations is matched with a corresponding rise in hiring plans, according to Mallett. Almost 32 per cent of business owners expect to increase full-time employment in the next 12 months�more than a point above December�s mark. Construction businesses, manufacturing, wholesale and business services firms are the most likely to increase staffing levels during the year ahead.

When asked about factors affecting their businesses, Mallett said on the positive side, more businesses report improving customer demand than declines. Wage demands and labour availability are still a concern, but not to the same extent as the previous quarter, while concerns related to energy prices are back up, largely because of the latest spike in gasoline prices at the pump. To a lesser extent, other input costs are also cited by businesses as a reason for weakness in business conditions and concerns about insurance availability and cost linger, but not nearly to the same degree as in the past couple of years.

�While the results are positive, it is fair to say the small business economy is not yet running at full capacity, the way it was earlier this decade,� Mallett concluded. �Recent announcements at the Federal level to encourage capital investment, reduce red tape and enhance capital gains rules are all welcome developments, but the economic spark that would come from other more stimulative government policy options, such as broad-based tax cuts, remains elusive.�

The survey was conducted via fax and e-mail between March 6 and 17, 2007 and drew 1,920 responses.

Business Barometer is a quarterly publication of the Canadian Federation of Independent Business and is a registered trademark.

About CFIB

Since 1971 the Canadian Federation of Independent Business (CFIB) has been giving small firms a big voice in the public arena. Best known for high-profile actions with governments on policies like tax, labour laws and public sector spending, we have also achieved many behind-the-scenes changes that have meant real dollars-and-cents benefits to all firms.