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March 2018

Ted Mallett, VP and Chief Economist

Canadian small business optimism slipped backwards in March. CFIB’s monthly Business Barometer® Index fell to 60.7—about a point and a half below February and two points under January’s reading. Small business owners are struggling to regain the confidence levels they had had in early 2017 and general optimism remains subpar compared to pre-2014 norms. 

Business sentiment remains weakest in Newfoundland and Labrador, with an index of 52.7. Although losing almost 4 points there this month, the longer-term trend has been upward. A big disappointment, however, is in the next two least-optimistic provinces, Ontario and Alberta. Ontario’s index lost another two points or so to land at 57.1, while Alberta’s sat unchanged at a weak 56.3. Owners in British Columbia are also getting the blues—which is pushing their index down almost 4 points to 65.9. 

Better news was seen in Saskatchewan, where a five-point jump put its index above the national average for the first time since early 2016. Healthy three-point improvements were also seen in New Brunswick and the country’s most optimistic province—Nova Scotia—which hit another post-recession record of 75.0. There was a slight drop-off in optimism in Quebec, but the index remains robust at 72.6. A small decline in Manitoba brought its index back near the national average. 

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.

We are seeing a boost to short-term hiring plans, which normally shows up this time of year. The effect, however, is weaker than in the past—likely as more businesses have to struggle with wage bill pressures and a tighter labour supply. In addition, there has been a drop-off in the proportion of owners who say their businesses are in good shape. At 38 per cent, it is the lowest reading in more than a year.

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