Canadian small business confidence on the rise, but half are still in bad shape: CFIB

Severe operating challenges remain, but Canada’s small business sentiment improved in early May, according to new figures from the Canadian Federation of Independent Business (CFIB).

CFIB’s latest Flash Business Barometer reported a gain of 6.8 index points to 53.2 at the beginning of May, although half of owners say their companies are in bad shape.

An index level nearer to 65 indicates that the economy is growing at its potential.

“The index has far from recovered, but is up more than 22 points from its nadir of 30.8 in late March,” CFIB said in a statement. “More are finding ways to cope and the mood among business owners appears to be responding to prospects for loosened restrictions.”

Manufacturers were just under the national reading with a 53.1 on the index, a gain of 8.9 over April’s last reading. Business is looking up for 18%, but 39% describe the general state of their business health as bad.

Average capacity utilization was 49.8%, up 5%, while 12% are looking at hiring over the next three months compared to 32% that will be reducing staff.

“Small business owners are settling into the new normal and finding ways to cope and adapt,” said Ted Mallett, CFIB’s vice-president and chief economist. “The prospect of restrictions loosening in some parts of the country is also bringing some hope, but many are still considering layoffs and holding off on investments. Insufficient domestic demand remains the biggest factor limiting sales amid the pandemic.”

The picture across the country is showing more uniformity in business optimism than in past surveys, CFIB said. “Owners in New Brunswick (59.5) are the most upbeat, but only narrowly ahead of those in Manitoba (57.3), Ontario (57.2), British Columbia (56.7), Alberta (55.3) and Newfoundland & Labrador (50.0),” CFIB said. “Sentiment improved a little in Quebec, but its index remains the lowest at 36.4. Deepening concerns in the agriculture sector pushed Saskatchewan’s index lower to 44.8, while Prince Edward Island’s remains under the national average at 47.6.”