The confidence of Canadian small businesses has dipped to its lowest level since the onset of the pandemic in April 2020, according to the latest Business Barometer released by the Canadian Federation of Independent Business (CFIB). The 12-month small business confidence index dropped by 1.5 points to 47.2 in October, measured on a scale between 0 and 100. This number marks the third lowest reading in nearly 15 years.
An index above 50 means owners expecting their business’s performance to be stronger over the next three or 12 months outnumber those expecting weaker performance. An index level near 65 normally indicates that the economy is growing at its potential.
Almost all provinces experienced declines in confidence, with Quebec (46.1) and Ontario (46.5) reporting the lowest long-term outlooks. According to the report, the challenges faced by small businesses range from inflation and financial pressures to labour shortages and overall economic uncertainty.
Simon Gaudreault, CFIB’s chief economist and vice-president of research, said, “While our Main Street Quarterly forecasts suggested the economy would narrowly avoid a recession in the second half of this year, the situation for small businesses remains dire. Many are operating at full capacity but struggling to turn a profit due to a myriad of challenges. Inflation, financial pressures, labor shortages, and general uncertainty are pervasive issues affecting businesses in Canada right now.”
The survey results indicated that businesses are grappling with historically high concerns about occupancy (29 per cent), borrowing (44 per cent), insurance (56 per cent) and wage costs (66 per cent). The shortage of skilled labour also remains an issue, with almost half of businesses reporting difficulties in finding qualified employees.
However, the survey states some positives. Businesses’ average price increase and wage plans have seen improvement throughout 2023, standing at three per cent and 2.9 per cent in October, respectively. Additionally, the recent decision by the Bank of Canada not to increase interest rates further has provided some relief for entrepreneurs struggling with financial challenges.
Despite these positive aspects, the report highlighted the rising concerns regarding insufficient domestic demand, which reached 43 per cent in October, up from 39 per cent in September. This trend is particularly worrying for the retail sector, with businesses in this industry displaying low levels of optimism (40.7) despite the approaching holiday shopping season.
Andreea Bourgeois, director of economics at CFIB, emphasized the ongoing difficulties faced by small businesses. “While the softening labour market and stabilization of wage and price plans offer some relief from high costs, our various business indicators suggest that the outlook remains challenging. Small businesses are anxiously anticipating the coming months, especially given the ongoing geopolitical situation and the impending Canada Emergency Business Account (CEBA) repayment deadline, which is less than three months away.”