Toronto, February 23, 2023 — Small business confidence remained steady in February, with a half point increase to 51.7 on the long-term optimism index, but still at its historical lowest outside of recessions, according to the latest Canadian Federation of Independent Business (CFIB) Business Barometer®.
“While confidence levels have improved slightly, they’re still below pre-pandemic levels. In fact, even during the pandemic, we’ve seen better times,” said CFIB Chief Economist and Vice-President of Research Simon Gaudreault. “The confidence levels didn’t get worse this month but didn’t improve significantly either, suggesting a slow recovery and uncertainty around the economy. Many businesses continue to feel the burden of years of subpar business conditions, which are now compounded by all sorts of rising costs.”
In a separate February CFIB survey, one in two business owners reported revenues were below normal for this time of year, with only one third of businesses making normal profits. A share of 58% are still holding some pandemic-related debt, at an average of $106,000, showing no meaningful improvement since November readings of 58% and $114,000. Expenditures are also under pressure, with close to six in ten businesses reporting they are above normal.
The shares of businesses struggling with energy (69%), wages (63%), insurance (59%) and product input (45%) costs are all above their historical averages, according to the February Business Barometer. A total of 38% of businesses are now citing borrowing costs as a challenge, a new historical high and double the share from 12 months ago.
“While the Bank of Canada has a core mandate to fight inflation and keep it reasonably close to the 2% target, our February data shows that a large part of the small business sector is currently under great financial pressure due to subpar revenues, accumulated pandemic debt and a rapid and significant rise in interest rates,” added Gaudreault. “The next few months will be critical to the future of many of them, and any fiscal or monetary policy decisions should be evaluated with that reality in mind.”
In response to the current inflationary situation, businesses expect to increase wages by 3.3% over the next 12 months, compared to January’s 3%, while average price plans have reached 3.7%, a small uptick from 3.5% last month. While fairly high, generally speaking these plans remain on a clear downward path since mid-2022 and show encouraging signs of moderation, especially relative to the latest change in the consumer price index reported by Statistics Canada this Tuesday (a 5.9% year-over- year increase as of January 2023).
Among other February Barometer results, across Canada, the Western provinces gained some optimism over the long term. On the other end of the spectrum, Quebec (47.0) and three of the four Atlantic provinces — Newfoundland and Labrador (45.3), New Brunswick (45.7), and Nova Scotia (47.7) — are trailing the rest of the country with levels below 50.
The overall sectoral picture is stable and positive, with minimal changes in confidence from January. Manufacturing (49.5), agriculture (44), and retail (43.8) were the three sectors at the bottom, reporting confidence levels below 50 over the next 12 months.
“For small business owners, the past few years were like running an uphill marathon. Now they realize it’s not over yet. They don’t know whether interest rates will continue to increase, how to lure customers back amid high inflation, or where to find qualified staff,” concluded Gaudreault. “All this makes them question the viability of their business and whether they should just drop out of the race and close their doors for good. With the budget season fast approaching, it is urgent that governments consider all options to relieve them of some financial pressure, including extended repayment and debt forgiveness for COVID-related loans like CEBA.”
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Dariya Baiguzhiyeva, CFIB
February Business Barometer®: February findings are based on 531 responses from a stratified random sample of CFIB members, to a controlled-access web survey. Data reflect responses received from February 2 to 13. Findings are statistically accurate to +/- 4.3 per cent, 19 times in 20. Every new month, the entire series of indicators is recalculated for the previous month to include all survey responses received in that previous month.
Your Voice – February 2023: an online survey completed by 2,921 CFIB members between February 8-20, 2023. The survey is still active and the results are preliminary. For comparison purposes, a probability sample with the same number of respondents would have a margin of error of ±1.8 per cent, 19 times out of 20.
Your Voice – November 2022: an online survey completed by 3,264 CFIB members between November 10-28, 2022. For comparison purposes, a probability sample with the same number of respondents would have a margin of error of ±1.7 per cent, 19 times out of 20.
The Canadian Federation of Independent Business (CFIB) is Canada’s largest association of small and medium-sized businesses with 97,000 members across every industry and region. CFIB is dedicated to increasing business owners’ chances of success by driving policy change at all levels of government, providing expert advice and tools, and negotiating exclusive savings. Learn more at cfib.ca.