The Canadian Federation for Independent Business (CFIB) reported this morning that both short- and longer-term confidence of small businesses was flat in January as the pandemic continues to weigh on firm’s prospects.
The three-month index held steady this month at 31.6, while the 12-month business barometer index inched up half a point to 58.7. The CFIB notes that the gap between these two measures is widening to levels not seen since last March and April, not surprising given the public health measures currently in place are the closest we have come to the lockdown last spring.
By province, small businesses in Ontario had the most pessimistic view of their near-term outlook while those in Prince Edward Island had the most optimistic. Looking at the 12-month index, there is a clear geographical divide with those in British Columbia most optimistic followed by firms in Alberta and Saskatchewan. The lowest levels of confidence were in Newfoundland and Labrador and New Brunswick.
From a sectoral perspective, firms in the hospitality and arts, entertainment and recreation were the most pessimistic about their near-term prospects. Those in the finance, insurance and real estate industry had the most favourable short-term view aligning with Canada’s red hot residential real estate market. Looking out 12 months, firms in the health and education were most optimistic while firms in the personal services and agriculture industries tied for the lowest level of confidence.
Inflation has been muted in Canada due to excess supply, but survey respondents indicated a plan to increase prices by 2.1% this year to help recoup losses from last year and the cost of personal protective equipment.
While small business confidence remains above the lows observed in March and April of last year, it remains down from the summer as Canada contends with a deadly second wave of COVID-19 infections. Until we are able to safely reopen our economy, it is likely that small businesses will remain cautious about their future prospects. And, our recent research shows that small businesses are being hit harder than larger businesses during this recession. Our suspicion is that small business insolvencies and bankruptcies have been contained by government support programs and by taking on more credit. Once government emergency programs are scaled back, we expect the economic scars on small business to become more evident.
Alexander Economic Views 
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