Canadian small business sentiment recovers in May, CFIB business barometer surges to 62.5

Canada’s small business confidence rebounded in May from a subdued April print. The CFIB business barometer rose sharply by 5.9 points to 62.5 in May. The month gain countered almost all the losses incurred in the three prior months, bringing the confidence reading back to levels last seen near the beginning of the year.

As noted in the CFIB release, part of the April’s subdued results could be because of inclement weather, with the return of more seasonal temperatures in May raising the sentiment measure toward more normal levels as economic activity normalized.

Ontario was the main driver behind the recovery, with sentiment in Canada’s largest province rising almost 8 points to 64.7 – outperforming the national print for the first time in a year. Rebounded sentiment in Prince Edward Island rose 5.2 points to 70.5 – the most optimistic province in the nation – also lent some support.

Sentiment dropped in all other provinces, with mild falls seen in most, while more pronounced falls were seen in Nova Scotia and Saskatchewan – the latter also being the lead optimistic nationwide. Except for Ontario, all other provincial indices saw the two to four month moving averages.

Industry wise, sentiment rebounded throughout most industries, with gains seen in eight out of 13 sectors. Finance and transportation were the most optimistic, while at the other end of the spectrum were hospitality and natural resources.

Among the remaining indicators, owners’ views on the status of their business are pretty optimistic, while expectations regarding future performance rebounded in the month. Average wage plans continued their gradual fall, as did the share of businesses indicating towards wages as an input costs causing difficulty.

Following three straight monthly falls, the huge rise in sentiment in May is quite a welcome development, particularly since it is accompanied by rebounded views on current business conditions and brighter expectations of future performance, stated TD Economics in a research report.

“Ultimately, we expect the confidence measure to improve gradually over the remainder of the year and line up with economic growth that runs somewhat above potential after a soft GDP print last quarter (1.3 percent Q/Q ann.)”, stated TD Economics.

At 20:00 GMT the FxWirePro's Hourly Strength Index of Canadian Dollar was highly bearish at -126.414, while the FxWirePro's Hourly Strength Index of US Dollar was neutral at -8.98722. For more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex

FxWirePro launches Absolute Return Managed Program. For more details, visit http://www.fxwirepro.com/invest