Canadian small business sentiment falls slightly in September

Canada’s small business sentiment dropped a bit in September. The CFIB Business Barometer dropped 0.2 points to 61.4. This is slightly below August’s print of 61.6, leaving the index slightly above its year ago levels and usually consistent with recent trends, but markedly below its pre-2014 average.

Region wise, changes in small business sentiment were comparatively muted. Sentiment fell only in Nova Scotia, Manitoba and Newfoundland & Labrador. Decent rises were seen in Quebec and Ontario. These were followed by Alberta, which moved up 0.9 points to 54.8, but still maintained the bottom spot, noted TD Economics in a research report.

Sector wise, performance came in mixed, with rises in seven out of the 13 sectors. Natural resources, agriculture and financial services saw impressive gains. This was partly countered by falls in information, arts and recreational services, hospitality, retail and construction.

Wages and fuel costs rose slightly sequentially to keep their second and third positions respectively, as the major input costs causing difficulties for companies. In the meantime, average wage and price plans were nearly unchanged, rising 10 bps to 2.1 percent and falling an equal 10 points to 2.3 percent, respectively.

The share of businesses reporting the situation of their company as “good” increased on the month, but was matched by a nearly equal rise in those reporting it as “bad”. Forward looking indicators came in a bit positive, with a decent rise in companies reporting a “much stronger” expected performance in the next 12 months. However, hiring plans, on net are not as positive.

Tight labor markets continue to be a restraint to small businesses, with the shortage of skilled and semi/un-skilled labor still being reported as factors limiting companies’ ability to increase production. These are likely to steady going forward as some wage pressures are passed through price rises, stated TD Economics. A recent decision to halt scheduled minimum wage hikes in Ontario might slightly add to this stabilization.

“The release points to a relatively stabilizing picture of small business confidence this year, which, barring a couple of months, has hovered around the 60.7-62.7 range and struggled to push to levels associated with similar points in previous cycles”, said TD Economics.

Sustained rises in oil prices might bring up sentiment among provinces that have yet to entirely recover to pre-oil-shocks levels. This point is corroborated by the recent rise in sentiment in the natural resources sector. Risks around trade uncertainty and rising input costs, however, will continue to be a concern, added TD Economics.

At 14:00 GMT the FxWirePro's Hourly Strength Index of Canadian Dollar was highly bearish at -116.056, while the FxWirePro's Hourly Strength Index of US Dollar was bullish at 99.8111. For more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex