Business Barometer®

October 2016

Ted Mallett, VP and Chief Economist

Small business optimism eased off slightly in October, following on the heels of a similar downshift a month earlier. CFIB's Business Barometer Index now stands at 57.7, down from 59.0 in September and 59.8 in August. The index, however, remains well above cyclical lows registered early in the year.

Results across the provinces were mixed—rising in six and falling in four. Keeping with past patterns, the most optimistic businesses are in Prince Edward Island, Nova Scotia, Quebec and British Columbia, where index levels are all effectively equivalent at around the 65 mark. Ontario business owners followed with an index score of 60.4, while those in New Brunswick, Manitoba and Saskatchewan measured in closely between 55.1 and 56.1. Businesses in Alberta and Newfoundland & Labrador again showed the lowest levels of optimism with index levels at 41.5 and 44.4 respectively.

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.

Although the overall results are relatively stable, industry findings appear to be stretching out differences between high- and low-performing sectors. Businesses in the information, arts and recreation sector are the most upbeat, followed closely by those in financial services and real estate. Retailer optimism has recovered somewhat and manufacturers are also reasonably upbeat. We are still seeing relative weakness in transportation, hospitality and professional services.

The general state of business health has remained stable, and so have price and wage expectations. There are a number of developments to watch however. Although employment plans tend to fluctuate seasonally, this October's downward turn was far sharper than usual. In addition, investment plans dipped to a record post-recession low.

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