December 17, 2008 – Toronto – Overall expectations among the owners of Canada’s small- and mid-sized enterprises (SMEs) has fallen to a near record low of 86.1 in December, according to findings from the latest survey of business optimism released today by the Canadian Federation of Independent Business (CFIB). Nationally, latest expectations push the December Business Barometer index down from its previous cyclical low of 90.3 in October and early November and further from a high of 101.8 in September.
“Today’s conditions will almost certainly put Canada’s GDP in reverse in the fourth quarter,” said CFIB’s chief economist Ted Mallett, adding “the decline could carry well into the New Year.”
The provincial picture
In this quarter, findings show results by the provinces differ very little, with optimism falling in every region. The most optimistic businesses reside in Saskatchewan, where the index barely tops the 100 mark. Next in line are businesses in New Brunswick and Newfoundland and Labrador.
BC, which only two years ago had the most optimistic small business sector, now has the least, dropping to an index level of only 82.9 and just under Ontario’s 83.0. Alberta’s small business owners are also registering an index level of only 84.3. All other provinces are registering around the weak national average in the high 80s or low 90s.
From commodities to industrial products, the sentiment remains negative across the board. With index levels well below the September numbers, businesses in the health and education sectors, business services, finance and even hospitality show only a faint increase in December optimism from levels of a few weeks earlier. The most negative news, however, is optimism in the manufacturing sector, dropping to even lower depths with an index level below 80, with wholesale and construction sectors not far behind.
The service sector, traditionally the economy’s fastest growing and the most insulated from economic swings, shows the only sign of gain.
Retail performance this holiday season is turning out to be poor by historical averages. With only 5 per cent of small business retailers saying they are performing much better than a year ago, and almost three-times as many doing significantly and measurably worse. Almost one-quarter of retail respondents say they are performing somewhat stronger and about a third are doing somewhat worse. The remaining 27 per cent have seen no significant change in their performance compared to last year.
Employment, wages and pricing plans
Compared to general business sentiment and views on how external conditions have changed, employment perspectives look almost positive in comparison. The December index shows 19 per cent of business owners expect to increase their full-time staff by this time next year, although the cooling of employment plans has coincided with a sharp reduction in the number of business owners expecting to give raises in excess of 2 per cent, cut by more than half to 22 per cent, compared to this time last year.
Although pressures on the cost of product inputs and energy have eased in recent months, they still exert pressure on about half of all businesses that are unable to lessen their load on their cost structures. More than half of all business owners now say the overall investment climate has deteriorated for their companies, compared to three months ago.
The price outlook has also eased off considerably. Inflationary pressures are now far lighter than they had been in September. Much of the price pressure however remains driven by exchange rates. The rapid and unanticipated decline of the Canadian Dollar relative to is U.S. counterpart has pushed up the price of products imported from the U.S. In a reversal of traditional findings, a higher percentage of business owners � 36 per cent � want a higher Canadian Dollar compared to those who would like to see it decline further � 25 per cent.
one can expect the small business sector to play a major role to pull the economy out of its current state.
The survey was conducted via fax and e-mail between November 26 and December 5, 2008 and drew 2,281 responses. It is accurate �2.1 per cent 19 times out of 20. The full report and provincial details are available at www.cfib.ca
CFIB is Canada’s largest association of small- and medium-sized businesses. Encouraging the development of good public policy at the federal, provincial and municipal levels, CFIB represents more than 105,000 business owners, who collectively employ 1.25 million Canadians and account for $75 billion in GDP. www.cfib.ca