The latest CFIB Barometer shows a further drop in optimism among Canadian SMEs, driven by economic pressures
The Canadian Federation of Independent Business (CFIB) reported a significant drop in the long-term confidence index for the next 12 months, decreasing by 5.4 points to 47.5.
This marks the second consecutive month of decline in this indicator, according to the latest CFIB Business Barometer®.
Provincially, Ontario and Saskatchewan experienced the most significant drops in optimism, with Ontario's index falling 6.7 points to 49.2 and Saskatchewan decreasing by 7.0 points to 47.6. Both provinces displayed a notable loss of confidence among business owners.
Andreea Bourgeois, CFIB's director of economics, highlighted the challenges small business owners face, stating, “Small business owners are trying to get back on their feet, but they keep getting knocked down to the ground.”
Factors such as the April 1 carbon tax increase, minimum wage hikes in certain provinces, and a persistent lack of demand have negatively impacted their confidence levels for the upcoming year.
During a time when businesses typically prepare for the summer season by ramping up hiring, small firms are showing restrained full-time hiring intentions. Only 16 percent of small businesses expect to hire in the next three to four months, while 11 percent anticipate layoffs.
Additionally, small businesses' average price and wage increase plans have risen to 3.2 percent and 2.9 percent, respectively.
Bourgeois expressed concern over the 0.5 percent month-over-month growth in the planned average price increase for the next 12 months, indicating a negative outlook among business owners.
She noted, “With recent payroll increases and high wage costs affecting a record share (68 percent) of businesses, it makes sense that they are less likely to hire and expect to raise prices.” The recent carbon tax hike may also lead some firms to pass additional costs onto consumers.
Demand constraints have steadily increased since the second quarter of 2023 and remain the primary limitation on business growth and sales for over half (52 percent) of small firms in April.
CFIB's Main Street Quarterly special analysis revealed that insufficient demand has reached its highest level since the pandemic began, affecting half of SMEs.
Additionally, high insurance costs are posing challenges for 72 percent of businesses, reaching the highest point in decades and significantly above the historical average of 49 percent.
Bourgeois concluded by reflecting on the broader economic environment, “The situation is not looking good for many SMEs this month. While the Bank of Canada's restrictive policy helps cool inflation, it's negatively impacting businesses' ability to operate and compete.”
