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Small business confidence took a steep dive in July. CFIB’s Business Barometer® index lost five and a half points to land at 56.8—its second-weakest monthly performance since the 2015-16 resource price crunch. The latest results coincide with a fresh round of trade jitters that burst out after the G7 summit. New US tariff action on steel and aluminum, Canada’s retaliatory response on a broad suite of US products and deepening global divisions on trade likely contributed to a souring mood among business owners.
The biggest hit to confidence this month was in Ontario, losing 6.1 points off its index. Sizeable declines were also noted in New Brunswick, Quebec and British Columbia. There was some rebound seen in Newfoundland & Labrador and Saskatchewan, but sentiment there remains far below historical norms. With an index of 73.1, Prince Edward Island has the most optimistic business owners, followed by Quebec, (69.5), Nova Scotia (65.0) and Manitoba (60.1). Sentiment among each of the other provinces is below the national average, ranging from 56.1 in British Columbia to a low of 50.0 in Saskatchewan.
The sector picture also looks like it’s affected by trade concerns. Sentiment in agriculture dropped 7 points to 40.3, retail fell almost 6 points to only 54.2 and there were noticeable declines in wholesale trade, transportation and the information sectors. That said, manufacturing sentiment remains modestly positive, along with many parts of the service sector.
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.
The other metrics on business performance and expectations are looking more neutral. Forty-four per cent of owners report their businesses being in good shape, versus 13 per cent who report being in bad shape—both estimates are on the better side of normal. Hiring plans have settled back a bit though, with only 17 per cent of owners expecting to add full-time staff compared to 12 per cent who plan to cut back in the next three or four months.
Ted Mallett, vice-president & chief economist, 416 222-8022
Andreea Bourgeois, senior analyst, 506 855-2526
Simon Gaudreault, senior director, national research, 514 861-3234