Business Barometer®

December 2016

Ted Mallett, VP and Chief Economist

2016 is ending on a more optimistic note for small business owners. CFIB’s Business BarometerÒ climbed to 60.7 in December. It is only a 1.3-point gain from November, and not stellar by historical norms, but the latest result is the best reading we've seen since March 2015.

Although modest, the improvements are broad based. The index improved or held steady in 9 of 10 provinces. British Columbia business owner are the most optimistic, with an index level of 69.5, followed by those in Manitoba (66.7), Quebec (65.8) and Nova Scotia (64.9). Only half a step behind are business owners in Ontario (64.2), Prince Edward Island (63.2) and New Brunswick (60.4). Optimism in Alberta (43.4), Saskatchewan (54.0) and Newfoundland & Labrador (47.7) continues to lag, but improvements there are still notable over November results. 

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.

There is less consistency in industry results this month. Big improvements in optimism in the resources and construction sectors are offset by declines in retail and information sector expectations.

A number of other positive signs emerged from this month’s survey. Forty-one per cent of owners say their businesses are in good shape—a 13-month high—and, 54 per cent expect to spend on capital goods in the next few months. Order books are looking better and pricing plans are climbing back to near the plus-two-per-cent mark.  There is still some caution in business owners’ expectations, however, because short-term employment plans remain weak—even after taking seasonality into account. Only 13 per cent expect to hire full-timers in the next few months, versus 16 per cent who expect to cut numbers.

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