Canadian small business sentiment rebounds in August

Small business sentiment in Canada recovered in August. The CFIB Business Barometer rose 4.9 points to 61.6. This partly erased a portion of last month’s disappointing 5.4 point fall, and puts the index slightly above its year-ago level; however, it is still below its pre-oil-shock 2010-2014 averages.

Region wise, sentiment rebounded in 8 out of 10 provinces. Quebec and Prince Edward Island still maintained their top spot, rising 2.3 and 0.9 points to reach 71.8 and 74, respectively. The resource-rich economies of Saskatchewan and Newfoundland & Labrador led this month’s gain, but continue to be below the national average. Business were also slightly positive in New Brunswick, Manitoba, Nova Scotia and Ontario.

Sector-wise, performance came in mixed. Out of thirteen broader sectors, seven sectors saw rise in the index. Professional & business services maintained the top spot at 67.2, whereas health and educational services rose to 66.5. Sentiment fell the most in financial services, transportation and construction. The agricultural sector rose just slightly, maintaining its last position.

The share of companies reporting the general situation of their business as “good” or “satisfactory” against “bad” increased on the month – but with all of the rises centered in the “satisfactory” category. From a forward-looking perspective, the share of businesses expecting stronger performance rose to 40.5 percent.

Average wage and price rise plans for the next 12 months dropped a bit to 2 percent and 2.4 percent, respectively. Fuel and wage costs continued to be close to the top of input costs causing difficulties for business, in spite of falling on the month, whereas tax and regulations rose and stayed in top place.

“Looking ahead, there are reasons to be optimistic regarding NAFTA. Any potential resolution should push the index upwards and hopefully reduce some of the volatility experienced in the past year”, stated TD Economics in a research report.

At 18:00 GMT the FxWirePro's Hourly Strength Index of Canadian Dollar was neutral at 20.016, while the FxWirePro's Hourly Strength Index of US Dollar was neutral at -8.3855. For more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex