Small business confidence in Canada continues to decline as companies grapple with rising costs and labor shortages, according to new survey data from the Canadian Federation of Independent Business (CFIB).
The CFIB says its latest business barometer found more businesses are feeling less optimistic heading into the holiday season. The 12-month optimism index fell to 50, a level not seen since the pandemic-induced economic slowdown in 2020. Outside of the decline in 2020, November’s decline is the lowest since 2009. The CFIB says the index’s level is within normal range near 65 indicates that the economy is growing at its full potential.
“The situation remains sobering for many small businesses,” Simon Gaudreault, CFIB’s chief economist and vice president of research, said in a statement.
“The high cost of doing business, the lack of staff and the constant increase in interest rates make it difficult for them to know where their business is going.”
The CFIB survey found that rising borrowing costs are causing difficulties for 35 percent of business owners, compared to 17 percent last year. The Bank of Canada has been on one of the most aggressive tightening cycles in its history as it tries to combat surging inflation, issuing six consecutive rate hikes since March, bringing the benchmark rate to 3.75 per cent.
The survey also found that 71 per cent of businesses say the main factor limiting business growth is the cost of fuel and energy, followed by a lack of skilled (53 per cent) and ‘semi/unskilled’ workers (38 per cent).
The results come ahead of the holiday season, a crucial time for many small businesses, especially in retail. While the retail sector typically sees a boost in optimism during the holiday season, the outlook for retail businesses remains grim, falling to the third lowest level in 12 months.
An Equifax Canada survey released last week found that 60 per cent of Canadians say they will spend less on gifts this holiday season due to inflation. Equifax Canada also found that only one in four (25 per cent) small business owners said they felt more confident about the 2022 holiday season compared to 2021, down from last year when 36 per cent felt more confident.
“For many, the usual uptick they expect from holiday sales doesn’t look as promising this year,” CFIB economics director Andreea Bourgeois said in a statement.
“With big shopping events coming up this weekend – Black Friday, Small Business Saturday and Cyber Monday – this is another reminder to support local businesses.”
CFIB’s monthly Business Barometer survey in November was based on 719 online responses from members of the trade group, with a margin of error of +/- 3.7 percent, 19 times out of 20.
Alicja Siekierska is a senior reporter at Yahoo Finance Canada. Follow her on Twitter @alicjawithaj.
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