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Sask small biz optimism sees slight increase in January; but hiring plans remain weak

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According to the latest monthly Business Barometer®, optimism among small business owners in Saskatchewan increased slightly in January to an index of 55.0, up 1.0 points from 54.0 in December, remaining below the national average index of 60.1.

While small business optimism in Saskatchewan increased slightly in January, it remains below the national average index, and is 10 points below the range of index levels (65 -70) normally associated when the economy is growing at its potential. Hiring plans also remain weak with only 9 per cent of business owners looking to hire full-time, while 11 per cent are planning layoffs.

With Saskatchewan small business optimism lagging behind most of the country, the last thing the province should do is increase taxes, which would further erode investor and consumer confidence. While entrepreneurs recognize the fiscal challenges the province is facing, they worry the government may hike taxes in the upcoming budget to address its revenue shortfall. Instead, the government needs to continue focusing on the spending side of the ledger in order to get back to balance.

Nationally, although small business optimism has stepped back a little in January from December readings, it is still showing more buoyancy than what we had seen though most of 2015 and 2016. The national index now stands at 60.1.

Improvements in the outlook among natural resources companies continues—and strength is also found in the manufacturing, professional services and information sectors. Unfortunately, optimism in the consumer-facing sectors—retail, hospitality and personal services—has tailed off, suggesting more caution in that side of the economy.

Regionally, however, conditions are remaining pretty consistent. Quebec business owners are the nation's most optimistic, with an index at 68.6. Owners in Newfoundland and Labrador, Alberta and Saskatchewan are considerably less upbeat, but the gap relative to the rest of the country is narrowing. Index levels in the remaining provinces are reasonably positive and tightly bunched in the mid-60s range.

Highlights of the Saskatchewan Business Barometer for January:

  • 35% of businesses in Saskatchewan say their overall state of business is good (39% nationally); 16% say it is bad (12% nationally).
  • 11% of Saskatchewan businesses plan to increase full-time employment in the next 3-4 months (15% nationally) and 11% plan to decrease employment (13% nationally).
  • Insufficient domestic demand remains the main operating challenge (51%), followed by shortage of skilled labour (27%), and management skills/time constraints (19%).
  • Major cost pressures for small business include: tax, regulatory costs (53%); insurance costs (49%), and wage costs (48%).