Business Barometer®: small biz optimism surges upwards in October

October 2014
Ted Mallett, Vice-President & Chief Economist

Small business optimism has surged upwards in October. CFIB’s latest Business Barometer® Index is up more than two points from September levels; and, at 67.8, it is the highest reading in more than three years. Fueling the optimism appears to be an easing of concerns about energy costs. 

The improvement in optimism is not uniform, however, raising questions about its sustainability into the future. Ontario’s index surged up almost six points on the month to 71.1—a rate of change that is almost always followed by a correction a month later. Alberta too saw its index improve to a nation-leading 74.6, despite uncertainty over oil and gas industry pricing trends. Much more modest gains in business confidence were noted in British Columbia (71.9) and New Brunswick (61.4), while optimism held, or actually fell back everywhere else. Business owners in Newfoundland and Labrador registered the steepest drop in sentiment, with their index dropping more than five points to 68.5. Index declines were modest everywhere else.

The industry picture looks far more stable in comparison—which is a good sign. Confidence in the bellwether manufacturing and retail sectors remains reasonably good along with construction and the range of service industries. The weakest perspectives come from the natural resources and hospitality sectors.

On a scale between 0 and 100, an index above 50 means owners expecting their business’ performance to be stronger in the next year outnumber those expecting weaker performance. One normally sees an index level of between 65 and 70 when the economy is growing at its potential.

Other indicators from the survey point to good or at least stable conditions. Employment plans are following normal seasonal patterns; 19 per cent of owners are expecting to take on more full-time staff in the next few months, while 13 per cent plan to cut back. Roughly 80 per cent of business owners also consider order books and accounts receivables to be normal or better than normal—near cyclical highs. Future wage and pricing plans are both holding at 1.8 per cent.

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