14 November 2008

Outlook by small business remains unsettled; too early to gauge if worst is over

The following news release was issued by the Canadian Federation of Independent Business (CFIB) on 13 November 2008.

After weeks of turbulence in the world’s financial markets and concerns of cascading effects on the Canadian economy as a whole, new research findings for this week show the outlook by this country’s small business sector remains unsettled and that it’s too early to tell if the worst is over. The information was gathered by the Canadian Federation of Independent Business (CFIB) in its sixth straight week of surveying small-business members.

CFIB’s chief economist Ted Mallett said the business barometer index dropped back slightly to 88.1 from a revised level of 90.5 the previous week. He said that although the week-to-week changes have become smaller, they still show greater than normal volatility with no clear trend. Mallett also pointed out that although there is still a full range of expectations among business owners, they are within the norms established in the past few weeks. He said 5 per cent continue to expect they will perform ‘much stronger’ in the next 12 months, with 21 per cent expecting to be ‘somewhat stronger’, a drop from 24 per cent who had this view a week ago. Mallett added that 9 per cent now anticipate being ‘much weaker’ in that time, which is a new high. He said another 33 per cent expect to be ‘somewhat weaker’, an increase from last week’s 32 per cent.

Credit concerns continue to cast a shadow over the economy, said Mallett, as they spiked upward this week with 29 per cent of small business owners reporting that credit is harder to obtain now than three months ago. He added that only 2 per cent of owners have actually seen an improvement, which remains on par with recent weeks’ findings.

With respect to employment, the silver lining continues to shine through, with business owners holding on to a slim net-positive perspective as 24 per cent see their firms to be hiring full-time employees in the next 12 months. This compares with a reading of 21 per cent of respondents who shared this view last week. On the other hand, 16 per cent expect to cut back on staff.

Mallett said it should be noted these perspectives do not yet represent firm plans by small business owners in that developments in financial and commodity markets are still too volatile and uncertain to allow them to plan effectively. He further stated that growth may be paused for the moment, but longer term performance of small- and mid-sized enterprises will depend on how markets settle out over the next few weeks and months…

The Business Barometer report is available on the CFIB website at: http://www.cfib.ca/research/reports/rr3075.pdf.