Business Barometer®: small biz confidence leaking oil in December

December 2014
Ted Mallett, Vice-President & Chief Economist

Oil prices, in a seeming freefall, have severely dampened small business optimism across the country. Any potential boost in sentiment from lower energy costs has yet to materialize, while the diminished outlook in oil producing regions has been swift. CFIB’s December Business Barometer® Index fell four points to 61.9.

Optimism fell in 8 of 10 provinces, led by 6.5-point declines in Alberta (to 66.2) and Saskatchewan (to 56.0) and a three-point drop in Newfoundland and Labrador (63.9). Manitoba business owners also posted a sizable four-point slide in optimism to 59.6, while in the top three oil consuming provinces, Ontario (64.1), Quebec (58.2) and British Columbia (72.4), the slippage was between one and two points from November levels. Only Prince Edward Island and New Brunswick (both now above 65) saw business sentiment improve.

Across industry sectors, we noted a small upward bump in sentiment from manufacturers and construction businesses, but is wasn't enough to offset the big turn to negativity from retailers, farmers and natural resource-based businesses.

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.

On the positive side, employment plans and  the number of owners who report their businesses to be in good shape remain steady. Recent events, therefore, are flagging caution, but real business activity will depend on where the pricing fundamentals end up in 2015.

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