Canadian small business sentiment falls sharply in December

Canada’s small business sentiment dropped sharply in December. The small business confidence measured by the CFIB Business Barometer dropped by 7.6 points to 53.6 from November’s 61.2. It is the lowest level seen since March of 2016.

Region wise, the soft performance was widespread, with the index dropped in 7 provinces out of 10. Alberta led the overall fall, possibly because of the soft oil price environment. Ontario, British Columbia, New Brunswick, and Newfoundland & Labrador also saw considerable falls. Quebec, Saskatchewan and Nova Scotia recorded modest rises in the month.

Softness was even more pronounced from an industry perspective, with 12 out of 13 sectors saw declines. Professional and enterprise services led the slump, but marked falls were seen throughout other industries, including wholesale, finance, insurance, and real estate, retail, manufacturing and natural resources.

Shortages of skilled labor, while falling on the month, still remained the top factor cited as limiting the ability of companies to increase sales. Nevertheless, net full-time hiring plans for the next three months fell, with fewer firms citing intentions to increase staffing. Moreover, the percentage of respondents citing the general business situation as “good” fell, whereas that of respondents citing their business situation as “bad” increased.

The expected percentage change in next year’s price plans remained the same at 2 percent, whereas that of wages dropped to 1.7 percent. This was a poor small business sentiment report, made worse by the modest handoff and the fact that the index has been hovering sideways for most of the year, noted TD Economics in a research report.

The widespread falls throughout provinces and sectors aligns with the moderating narrative, but the softening in hiring and capital expenditure plans might be a cause for concern.

“Last week's Business Outlook Survey release from the Bank of Canada provided a more optimistic picture of expenditure and hiring intentions, and this month's large slump in small business confidence and related indicators may prove partly transitory given recent oil price developments”, added TD Economics.

At 16:00 GMT the FxWirePro's Hourly Strength Index of Canadian Dollar was neutral at -30.1152, while the FxWirePro's Hourly Strength Index of US Dollar was neutral at 37.6591. For more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex