Business Barometer: Small business optimism takes a dip as year ends

After a period of relative smoothness through the summer and fall, small business optimism dropped off substantially in December. CFIB's Business Barometer® Index fell more than three and half points to land at 62.3, its lowest level since June.

On a scale between 0 and 100, an index above 50 means owners expecting their business’performance to be stronger in the next year outnumber those expecting weaker performance. One normally sees an index level of between 65 and 70 when the economy is growing at its potential.

There is not much variation by sector, but retail showed a bigger-than-average drop in optimism, with its index falling almost seven points to 60.0. Other indicators from the survey, however, remain relatively steady. Employment plans are basically unchanged, with 18 per cent expecting to add fulltimers in the next few months, versus 12 per cent who plan to cut numbers. Capital spending plans are also steady, although new orders and accounts receivables turned slightly negative this month. Of note though, 64 per cent of business owners report concerns about tax and regulation levels in December--a stat that has been trending higher this year after averaging 57 per cent in 2012.

Optimism fell in 7 of 10 provinces. The exceptions are BC, now with the nation's most upbeat business sentiment with an index of 72.6, as well as less-upbeat Prince Edward Island (58.3) and New Brunswick (56.7). The biggest declines were seen in Quebec, which is now least optimistic among the provinces at 53.8, Nova Scotia dropping to 58.3, Ontario (62.9) and Manitoba (63.4). Newfoundland and Labrador (68.1) also saw a downward correction, but back to levels typical of the first half of the year. Not much change in business sentiment was noted in Alberta and Saskatchewan, where index levels still hover near the 70 mark.

The full report, by CFIB's Ted Mallett, VP & Chief Economist, is available at http://www.cfib-fcei.ca/cfib-documents/rr3315.pdf.