Business Barometer®

August 2016

Ted Mallett, VP and Chief Economist

Small business optimism took a bounce back upward in August. CFIB’s Business Barometer Index erased a weak July reading, rising more than two points to 59.8—almost the same as its June level and the second-highest monthly mark registered since May of 2015. Sentiment still has plenty of room to improve though, with the index running five points under its 2010-14 average.

Improvements were widespread across the provinces—rising in five, including Prince Edward Island (70.5), Quebec (64.9), Ontario (62.6), Nova Scotia (62.3) and Saskatchewan (54.9). Of the provinces that saw index declines, four of five were very slight—about a point or less in each case: British Columbia (65.6), New Brunswick (63.0), Manitoba (56.1) and Alberta (45.6). The steepest drop off in optimism, however, was in Newfoundland and Labrador (37.8).

Sector results were also roughly balanced, rising in seven and falling in six. Highest optimism was seen in the professional services (70.0) and health and education services (64.0) sectors—followed closely by above-average conditions in information, arts and recreation (63.5), finance, insurance and real estate (62.2), hospitality (61.3) and wholesale trade (61.2). The remaining sectors continue to show some weakness—notably retail (58.7), construction (56.2), manufacturing (55.7) and transportation (52.8). Agriculture also saw a steep drop off in optimism this month, with its index falling to 48.9.

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.

Other indicators from the survey displayed sub-par results compared to past years. Short-term employment plans remain weak, while conditions of order books and accounts receivables are less favourable. Only 50 per cent of owners are expecting to make capital purchases in the next few months—among the lowest monthly measures we have seen since the recession.

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