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TORONTO — Optimism among Canada's small and mid-sized businesses have dropped to their lowest level since third quarter 2001, according to the latest survey by the Canadian Federation of Independent Business.
“The sharp run-up on fuel prices, coupled with continued weakness in the U.S. export markets have taken their toll on business optimism,” said Ted Mallett, the CFIB's chief economist in a statement.
“The weakness is most pronounced among businesses exporting to the U.S. and those with larger payrolls,” he said.
The CFIB index fell to 100.7, down from 104.2 last December. The index is based on a quarterly survey of the organization's members on their business performance and expectations over the next 12 months.
About 37 per cent of business owners said their performance is much stronger or somewhat stronger than last year, while 31 per cent say performance is much worse or somewhat worse.
Across industries, optimism remained higher in the services sector and lower in the goods producing sectors.
“The biggest negative news, however, came from the construction and hospitality sectors,” the report said.
“The previously robust construction index dropped more than 8 points to 98.7 in June from 106.9 in March, suggesting that economic uncertainty is encouraging business and consumers to begin holding off on major real estate outlays.”
And the hospitality sector “went into freefall,” plunging by more than 11 points, from 107.4 to 96.2
“Food price uncertainty, coupled with concerns that people will be travelling considerably less during peak tourist season this year because of fuel prices are slamming the sector from both directions,” the report said.
Moreover, responses suggest that soaring fuel costs are spreading throughout the entire production chain, driving up inflationary pressures, the report said. Forty-four per cent of businesses expect to raise prices in excess of 2 per cent.
And although overall employment expectations remain high (about 25 per cent of business hope to have more full-time staff in a year from now), that number dropped off from 30 per cent in March. And the number of businesses expecting to have fewer full-time staff decreased two percentage points from March to 10 per cent.
Business optimism is weakening in almost every province save Alberta, where the index rose to 106.3 in June from 102.8 three months ago.
“In the other provinces, concerns about the higher cost of doing business is pulling down levels of optimism,” the report said.
The country's most optimistic business owners continue to be in Saskatchewan and Newfoundland and Labrador, provinces that had identical levels of 110.3, down from last March. Steeper drops occurred in Nova Scotia and Ontario, where indexes dropped respectively to 93.3 and 96.9.
Some 1,874 business owners responded to the survey between June 2 and 13. The survey can be considered accurate plus or minus 2.3 per cent 19 times out of 20.
