Business Barometer®: Small business confidence continues downward trend
Ted Mallett, Vice-President & Chief Economist
September has seen yet another drop in small business confidence—the fourth monthly decline in succession. The Business Barometer® Index fell less than a point this month, but its new reading of 56.0 is a new cyclical low and a level not seen since April 2009. The index is now roughly 10 points below what was recorded in the fall of 2014.
Across the country, optimism fell in 6 of 10 provinces, but the main impact came from declining sentiment in Alberta, British Columbia and Ontario. Alberta’s index plunged to 34.0 this month, a record low for this survey. Optimism in British Columbia is still well above the national average, but it has declined significantly (more than 10 index points) since May. Ontario’s index has lacked verve of late, only mirroring the national average. Declines in optimism were noted in Prince Edward Island, Nova Scotia and Saskatchewan, but as offsets to increases seen in August. Other provinces (Newfoundland & Labrador, New Brunswick and Quebec) have seen small changes to the upside, but not enough to turn the overall average. Apart from conditions in Alberta, the profile of business sentiment across the country is pretty even.
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 is notable in construction, wholesale trade and hospitality.
Employment plans are weak compared to last year, but following normal seasonal patterns, with only 17 per cent of businesses planning to hire additional full-time staff in the next few months versus 15 per cent who plan to cut back. Plans for wage increases fell to only 1.3 per cent, but pricing plans have remained high, at 2.1 per cent.