Canada’s small business optimism falls again in August, economic growth rate to underpin sentiment

The Canadian CFIB Business Barometer index dropped 0.9 points in August to 59.8, marking the third consecutive decline with the index having pulled back a cumulative 6.2 points from the most recent cyclical high of 66 points in May.

Region wise, the performances were mixed, with sentiment falling in half of the provinces. The most pronounced drops were seen in Manitoba, Ontario and British Columbia. In all, sentiment readings continue to be lowest in the oil-producing provinces of Newfoundland and Labrador, Saskatchewan and Alberta.

The drop was more widespread throughout industries, with almost all segments recording a pullback in August. Sentiment stayed the same in natural resources while it rebounded in retail. However, both of these industries rank low in terms of confidence.

Other underlying indicators show mixed results. Average wage plans continued to be elevated at 2.4 percent after averaging only 1.5 percent in the first five months of the year.

“Since the CFIB is typically a leading indicator, the recent declines in the index suggest slower growth ahead, with weakness in unfilled orders and investment plans particularly concerning for the outlook”, noted TD Economics in a research report.

However, despite this slowdown in the third quarter, growth is expected to be relatively healthy and forecast to average 2.5 percent. While growth in Canada’s economy is likely to slowdown from the current hot pace, the still-decent rate of growth in the quarters ahead should underpin business sentiment, stated TD Economics.

At 22:00 GMT the FxWirePro's Hourly Strength Index of Canadian Dollar was slightly bullish at 57.1843, while the FxWirePro's Hourly Strength Index of US Dollar was neutral at 4.97601. For more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex

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