Business Barometer®: Small biz confidence drops sharply in June

June 2014
Ted Mallett, Vice-President & Chief Economist

Small business optimism fell back sharply in June, erasing the gains we had seen since March. The Business Barometer® Index ends the month at 63.5, almost three-and-a-half points below its May level--which had (briefly) been a two-year high. 

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.

The drop in optimism, however, was not broadly based, suggesting this may not be the beginning of a protracted trend. The darker mood was pretty much confined to the hospitality (53.0) and construction (58.8) sectors. Regionally, falling sentiment among business owners in Ontario (61.9), Manitoba (64.0) and Saskatchewan (65.8) alone drove the national figures lower. Elsewhere, provincial and indicators stayed on pattern, with highest optimism found in British Columbia (73.7), Alberta (72.6) and Newfoundland and Labrador (70.0).

Other indicators show reasonable underlying strength persisting. New orders indications are strong, while concern about lack of local demand has fallen to its lowest levels this business cycle. Short term hiring plans remain reasonably good for this time year and pricing and wage growth plans are pinned near the two-per-cent mark. The 39 per cent of owners who say the state of their businesses are in good shape are still below last year's levels, but the trend has been upward lately.

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