Ted Mallett, Vice-President & Chief Economist
Canada’s small business confidence remains stuck in low gear in June. The Business Barometer® Index was 59.4 this month, a decline of more than a point from May's level and now very near to the six-year low it reached this past February.
Alberta businesses remain the most downbeat, with its index falling to 44.3. The index levels in other oil-producing provinces Saskatchewan and Newfoundland & Labrador are up a little from last month, but at 53.6 and 60.8 respectively, optimism is still far below what we had seen a year ago. British Columbia businesses continue to be the most upbeat. Although its June index of 71.8 is a little lower than last month, it is a solid performance.
Small business optimism is reasonably strong in Prince Edward Island (66.7) and Nova Scotia (65.6), while we are also seeing positive movement in Manitoba (64.6) and to a lesser extent in Ontario (63.5). Small improvements in sentiment were seen in Quebec (58.2) and New Brunswick (60.5), but they still fall short of neighbouring provinces.
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 resources sector continues to show the weakest levels of optimism, but below-average sentiment is a condition generally of the goods-producing sector. The services sector is comparatively more upbeat, and retail businesses posted a nice rebound in June to be back above the average.
Other indicators suggest a firming up of general business conditions. Employment plans are returning to normal seasonal patterns, with 20 per cent of businesses planning to hire additional full-time staff in the next few months versus 11 per cent who plan to cut back. Plans for wage increases are back up to 1.6 per cent, after being closer to 1.4 per cent through the spring months. Capital spending plans, however, remain slightly subdued.