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January 2018

Ted Mallett, VP and Chief Economist

2018 began on a more confident note for small and mid-sized business owners in Canada. CFIB’s monthly Business Barometer® Index posted a 3-point gain in January over its December level. Now at 62.7, the index still suggests the small business sector has challenges, but it is the best reading seen since May of last year when it had hit a cyclical high of 66.0. The survey hit an operational milestone as well, registering its 100,000th response since the monthly questionnaire was introduced in February 2009.

Sentiment improved in 8 of 10 provinces, but there appeared to be some growing divergence between the most and least optimistic regions. Once again, business owners in Quebec (71.3), British Columbia (66.7) and Nova Scotia (63.9) led the country and all three areas showed healthy gains over December results. Month-over-month improvements were also significant in Manitoba (61.6), New Brunswick (56.9) and Saskatchewan (53.6), though they still lag the national average. There was only a small improvement in Ontario (58.7), while sentiment in Alberta (59.4) dropped half a step back. Optimism is lowest in Newfoundland & Labrador (51.8) and now Prince Edward Island (52.4).

The industry picture also showed mostly forward momentum, rising in 11 of 13 major sector groups. Sentiment is most positive in the financial sector (70.6) along with professional services (69.8), while the hospitality sector (52.6) remains the least optimistic. 

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. 

Short-term employment plans are looking a little better with 19 per cent of businesses planning to add to full-time staff levels. The 16 per cent expecting to cut back, however, remains elevated—likely due to new minimum wage rules in Ontario. For the same reasons, wage plans have risen sharply to 3.2 per cent, echoing a similar 2.6 per cent rise in pricing plans.

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