Falling dollar, oil prices, send business confidence to post-recession low

January 2016
Ted Mallett, Vice-President & Chief Economist

The almost steady decline in small business optimism seen through 2015 has stayed on trend for the first month of 2016. The Business Barometer® Index reached a new post-recession low of 54.3 in January—about 10 points below the level associated with normal economic growth.

Nova Scotia businesses continue to lead the country in optimism, but an index level of 69.0 is off a couple of points from December.

On the other side of the country, Alberta's index declined yet again, and at 28.8 points, plumbed depths so far uncharted by the Barometer. Ontario's index also dropped to 58.4—second lowest in the country. Saskatchewan and Prince Edward Island businesses were not much higher, at 58.7 and 60.3 respectively. Business owners in the remaining provinces showed only modest levels of optimism—with index levels ranging in the low 60s.

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 industry profile is holding to pattern, with the goods-producing sectors considerably less optimistic than the services sectors.

The general state of business health is holding to past results, but hiring and wage plans are weak for this time of year. The Dollar's freefall is also causing problems—the percentage of respondents squeezed by currency-related costs has reached a record 38 per cent, compared to 10-15 per cent in more 'normal' times.

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