Small Business Confidence Continues Sliding
According to the latest Canadian Federation of Independent Business (CFIB) Business Barometer, small business confidence over the long and short terms fell again in June. The short-term optimism index dropped by almost five points to 54.4, while the 12-month outlook fell by nearly three points to 59.4.
Average wage increase plans for the next 12 months continued to climb and have reached an unprecedented 3.7%, while average price plans haven’t changed much (4.8% over 12 months).
“Small businesses continue to feel the pressures of rising costs and shortages of labour and products. This leads many of them to feel uncertain about the future,” said Andreea Bourgeois, Director of Economics at CFIB. “As inflation bites, a large number of small businesses are finding it harder to return to normal operating conditions.”
Short-term business confidence worsened in almost all provinces, especially in Ontario (-6 index points) and Quebec (-4.5 index points). Long-term optimism also deteriorated in all provinces except Prince Edward Island, New Brunswick, and Saskatchewan.
Fuel and energy continue to be the top factor limiting business growth for 77% of businesses. In comparison, labour and input products shortages were the top cost constraint for 50% and 30% of businesses, respectively. About one-third of entrepreneurs reported borrowing costs caused difficulties in June, a 7% jump since May.
“While our political leaders describe that ‘business is booming’, this is very much not the case for 54% of small businesses that have yet to return to normal levels of revenue,” said CFIB president Dan Kelly, citing data from the Small Business Recovery Dashboard. “And even those who have seen sales return to normal are now dealing with massive increases in costs with 62% of small business owners facing pandemic-related debt at an average of $160,000”.
Among sectors, businesses operating in the information, arts, and recreation sector reported a sharp drop in short-term confidence (-11 index points). In comparison, the health sector saw a decrease of 5 index points.
Full-time hiring plans are still overall positive; however, there was a turnaround, with 23% of businesses planning to hire in the next three months, compared to 30% in May.
“Concern over fuel and energy costs have never been this high. Given the challenges small businesses are currently facing, CFIB is calling on the federal and all provincial governments to scrap or temporarily lower fuel excise taxes for the months ahead, pause planned hikes to carbon taxes and finally address the tax-on-tax anomaly with fuel sales taxes. Canada should be borrowing approaches from the United States, Ontario, Alberta, and Newfoundland by reducing fuel-related taxation,” Kelly said.