As the economy is slowly allowed to reopen, small business sentiment in Canada is showing only cautious improvement, according to the Canadian Federation of Independent Business’ latest Business Barometer.
The CFIB says the index in June now stands at 54.6, only about two points above May readings and still well below historical norms.
According to the CFIB, an index level near to 65 indicates that the economy is growing at its potential.
“Even for business allowed to be fully open, operating conditions remain challenging. On average, businesses are operating at only 58 per cent capacity, a nine-point improvement on late May estimates, but well under what is necessary to be reliably profitable. The provincial optimism profile is patterned largely on the local COVID picture. The outlook in two of the Atlantic provinces (Nova Scotia and Newfoundland and Labrador) is slightly more positive, with index levels improving to near the 60 mark,” said the CFIB.
“Businesses in the Prairie region are also a little more optimistic than the rest. Sentiment, however ,remains more restrained in Quebec and Ontario, where COVID cases are highest, and in New Brunswick and Prince Edward Island. Owners understand the battle against the virus is unpredictable and that higher infections in the future could result in renewed closures and interruptions.
“Sector results display a fair bit of variation. Weakness is most focused in the agriculture, resources and recreation sectors. Retail businesses are also less optimistic than the average. Hiring plans remain extremely tentative, despite loosening operating restrictions. Only 14 per cent of owners expect to add full-time staff in the next few months, compared to 33 per cent who plan to pare further. While improved over last month, the numbers of businesses in bad shape (39 per cent) also still widely outnumber those in good shape (19 per cent). In addition, accounts receivable and new orders performance continue to underperform by a wide margin and capital expenditure plans remain muted.”
The following are the index scores for each of the provinces and their change from the previous month: Newfoundland and Labrador, 58.3 (+14.8); Prince Edward Island, 40.6 (+10.6); Nova Scotia, 62.3 (+3.1); New Brunswick, 46.6 (-1.2); Quebec, 38.1 (+2.4); Ontario, 54.0 (-3.1); Manitoba, 55.3 (+5.3); Saskatchewan, 59.1 (+7.2); Alberta, 55.7 (+0.2); and British Columbia, 53.6 (+0.9).
Business spirits continued to improve in June, as more businesses were allowed to reopen. However, the gain in June was much more modest compared to sharp bounce-back in May, and there is still a long and uncertain road ahead. Social distancing rules and other restrictions continue to weigh heavily on business profitability. Our recent report on spending patterns also echoes this, showing that while business spending began to recover, it is lagging consumer spending. It is thus not surprising that over a third of small businesses surveyed by the CFIB in June are planning layoffs and nearly 40 per cent have reported their business situation as bad,” said Ksenia Bushmeneva, Economist with TD Economics.
