Small business outlook for year improves slightly, still shows recession fears: CFIB
TORONTO — Small business owners have a slightly better outlook on the year ahead than a month ago but their short-term outlook has worsened, the latest survey results from the Canadian Federation of Independent Business (CFIB) said.
The small business confidence indicator registered 50.9 index points in December, up 0.9 points over November, the group said. While an improvement, it remains at levels usually only seen around recession periods, while the three-month outlook dropped more than three points to 40.2.
“The readings this month remain very low by historical standards,” said CFIB chief economist Simon Gaudreault in a statement.
“Businesses have been through the wringer, so it’s not surprising they’re entering the new year with caution and anxiety.”
In some measures though the business situation looks similar to where it was before the pandemic, with 38 per cent saying their business is in good shape and 17 describing it at bad, which tracks very closely to what respondents said in December 2019.
The inflation picture is starting to trend down, or at least settling some in recent months to help the outlook, said Gaudreault.
Cost pressures remain a concern though, with 73 per cent saying high fuel and energy prices are causing difficulties while 61 per cent said wages are an issue.
Higher borrowing costs as interest rates rise are an increasing concern at 37 per cent of businesses, up from 19 per cent in February. The trend is amplified by the high debt loads left over from the pandemic, Gaudreault noted.
Overall business confidence has only been lower during the early days of the pandemic and the Global Financial Crisis, noted TD economist Ksenia Bushmeneva.
“It’s not surprising that small businesses are feeling downbeat,” she said in a note.
“While challenges related to supply chain issues and some cost pressures appear to be gradually receding, other headwinds — such as rising borrowing costs — are intensifying.”
Business challenges could be amplified as TD expects growth and consumer spending to slow next year, said Bushmeneva.
The CFIB said firms in retail, agriculture and construction were the least optimistic on the year ahead with readings below 50 points.
The survey results are based on 620 responses from a random sample of CFIB members, reflecting responses received in the first nine days of December. It says findings are statistically accurate plus or minus 3.9 per cent 19 times in 20.
This report by The Canadian Press was first published Dec. 29, 2022.
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