Canadian small businesses more confident in January: CFIB

Small business optimism rebounded in January, but hasn’t yet returned to the levels seen from July to November 2013, according to the Canadian Federation of Independent Business (CFIB).

According the CFIB’s most recent Business Barometer Index, the “optimism level” rose 1.7 points to 64, clawing back about half of December’s losses.

On a scale between 0 and 100, an index level of more than 50 means owners expect their business’ performance to be stronger in the next year. CFIB said that the normal zone where the economy is growing according to its potential at between 65 and 70.

Ontario showed a 2.5-point gain to 65.4. Although Quebec showed improvement with a 56.2, CFIB observes businesses there remain the country’s least upbeat.

Ted Mallet, CFIB’s vice-president and chief economist, said in his summary that nationwide figures mask “notable declines in business sentiment” in the four western provinces. Overall, the most optimistic business owners are in BC (71.8) and Newfoundland & Labrador (68.1).

Seven of the 13 sectors saw gains, but retail and hospitality are below the mid line. Manufacturing advanced from December’s 61 to 63.9 but is behind from a year ago when optimism registered a 66.2. Optimism in the natural resources sector was a bit less at 63.6 from December’s 67.1, but still way ahead of the 54.1 registered a year ago.

Seasonally influenced future hiring plans have moved sharply upward, similar to the patterns seen last year, said Mallet. One-in-four businesses plan to take on more fulltime staff in the next few months, compared to 8% who plan to cut back. Pricing and wage plans continue to trend higher, rising to 1.6% and 1.7% respectively on an annualized basis.

In a follow-up statement from TD Economics, analyst Sonny Scarfone described the report as “not categorically positive,” weighing the gains in Ontario and Québec against the considerable slide in Alberta and Saskatchewan. “This fits TD Economics’ profile of convergence across provinces in 2014-2015, as a weaker loonie and little progress in commodity prices will help eastern provinces and BC recoup some of the lost ground,” he said.

Scarfone attributed pessimism in agriculture to lower prices in many growing regions that also experienced bumper crops in 2013.

But he called the positive momentum heading into 2014 “welcome” and in line with TD Economics’ forecast of real GDP growth increasing from 1.7% to 2.3% this year.