Small business confidence index reaches seasonal levels, driven by optimism in Ontario and key sectors
The 12-month small business confidence index has risen by 8.8 points to 56.4 in May, according to the latest Canadian Federation of Independent Business (CFIB) Business Barometer.
This increase brings confidence back to more seasonal levels, matching the reading from May 2023 (56.1) after the abysmal levels seen earlier this year.
Ontario's significant gain in optimism, up 9.1 points to 58.1, drives Canada's long-term confidence. The retail and transportation sectors have registered notable improvements of 4.9 and 4.7 points, respectively.
“Small businesses are overall feeling cautiously positive heading into the summer. Now that all the governments have tabled their budgets, business owners at least have some idea as to what to expect in the coming months. Their increased optimism could also be partly explained by much-anticipated interest rate cuts in June and the cooling labour market,” said Andreea Bourgeois, CFIB's director of economics.
“While some indicators of cost pressure and limitations on growth are still way above their historical averages, it's still reassuring to see overall improvements in the small business sentiment.”
Average price and wage plan increases stabilized in May, both sitting at 2.8 percent. The average price increase indicator dropped the 0.5 points gained in April, almost matching the March level (2.7 percent).
This month's Business Barometer suggests that labour market pressures are easing, with 45 percent of businesses reporting a shortage of skilled labour, down from 47 percent last month. Full-time and part-time hiring plans remain timid in May but are stronger than earlier in the year.
“While historically more businesses plan to hire ahead of the busy summer season, this year those hiring plans are more cautious but at least firms are not looking to lay off either,” Bourgeois added.
However, 68 percent of businesses reported struggling with high tax and regulatory costs. The share of businesses indicating high insurance costs has slightly decreased to 68 percent after peaking at 72 percent in April, but it remains much higher than the historical average of 49 percent.
