SME Confidence Falls for Fourth Consecutive Month
Small business confidence fell for the fourth month in a row, marking a significant decline over June results, according to the latest Canadian Federation of Independent Business (CFIB) Business Barometer. The 3-month index fell nearly 8 points to 46.7, while the 12-month index fell almost 7 points to 52.7 in July.
“Businesses are really feeling the pressure of inflation right now, with both price and wage increase plans at all-time highs and growing concern over labour shortages and input costs, particularly fuel and energy,” said Simon Gaudreault, Chief Economist and Vice-President of Research at CFIB. “Worse still, they don’t feel heard – only 16% believe the federal government understands the cost pressures they face, according to a recent CFIB survey. It’s no wonder they are feeling anxious about the future.”
Only 32% of businesses say they are in good shape, while 20% say they are in bad shape. Full-time hiring plans continue to narrow, with 20% of firms looking to hire over the next three months and 17% looking to lay off staff. Average price increase plans (4.7%) and wage increase plans (3.4%) are still coasting at historically high levels.
The major limitation on business growth is labour shortages (52% for needs of skilled workers and 39% for semi- or unskilled workers). Fuel and energy costs remain the top cost constraint affecting most small firms (76%).
All provinces and nearly all sectors experienced short-term drops in optimism this month. Still, businesses in Ontario (44.7) and Newfoundland and Labrador (45.7), and those in agriculture (37.7) and retail (38.7) were the least optimistic. While hospitality businesses (59.1) posted the highest sectoral confidence level, they experienced a 9-point drop last month.
“These indicators should serve as a serious warning to governments that businesses are struggling,” added Andreea Bourgeois, Director of Economics at CFIB. “They should be factoring this into their economic and policy decisions in the months ahead, as businesses can’t handle any more pressure.”