Business Barometer®: Business confidence continues slide in August

August 2015
Ted Mallett, Vice-President & Chief Economist

Small business confidence is continuing its downward glide through 2015. The Business Barometer® Index fell another 1.5 points in August to 56.7, its lowest point since April 2009. So far in 2015, the index has eroded by almost 8 points—largely on the basis of weakening sentiment in the Western Provinces.

Across the country, optimism fell in 7 of 10 provinces. Alberta’s index dropped to 40.4 this month, another 3.5 points off from July. Manitoba also saw a big decline in business sentiment, dropping to 53.8. Domestic conditions, coupled with weakening economic prospects in Asia have weighed down British Columbia’ index to 64.1. Conditions in the Maritimes remain the strongest on account of a favourable Dollar boosting business with the US. Prince Edward Island leads with an index of 67.3, while Nova Scotia is not far behind at 65.7. New Brunswick’s index saw little change at 61.1—basically in line with that of Ontario’s (61.3). August also saw some recovery of optimism in Saskatchewan, with its index rising to 61.9. Index levels in Quebec and Newfoundland and Labrador remain near 57.

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-par sentiment in construction, transportation and retail are offsetting reasonably good outlooks in the rest of the services sectors.

Employment plans are near normal seasonal patterns, with only 20 per cent of businesses planning to hire additional full-time staff in the next few months versus 12 per cent who plan to cut back. Plans for wage increases remain at 1.5 per cent, but pricing plans have risen to 2.2 per cent. Capital spending plans remain somewhat weak, with only 51 per cent planning to make major investments in the next 12 months.

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