Small business confidence remained steady in February, with a half point increase to 51.7 on the long-term optimism index, but still at its historical lowest outside of recessions, according to the latest Canadian Federation of Independent Business (CFIB) Business Barometer.
Simon Gaudreault
“While confidence levels have improved slightly, they’re still below pre-pandemic levels. In fact, even during the pandemic, we’ve seen better times,” said Simon Gaudreault, the CFIB’s Chief Economist and Vice-President of Research. “The confidence levels didn’t get worse this month but didn’t improve significantly either, suggesting a slow recovery and uncertainty around the economy. Many businesses continue to feel the burden of years of subpar business conditions, which are now compounded by all sorts of rising costs.
“For small business owners, the past few years were like running a marathon uphill. Now they realize it’s not over yet. They don’t know whether interest rates will continue increasing, how to lure customers back amid high inflation, or where to find qualified staff.
“All this makes them question the viability of their business and whether they should just drop out of the race and close their doors for good. With budget season fast approaching, it is urgent governments consider all options to relieve them of some financial pressure, including extended repayment and debt forgiveness for COVID-related loans like CEBA (Canada Emergency Business Account).”
In a separate February CFIB survey, the national organization said one in two business owners reported revenues were below normal for this time of year, with only one third of businesses making normal profits. A share of 58 per cent are still holding some pandemic-related debt, at an average of $106,000, showing no meaningful improvement since November readings of 58 per cent and $114,000. Expenditures are also under pressure, with close to six in10 businesses reporting they are above normal, said the CFIB
The shares of businesses struggling with energy (69 per cent), wage (63 per cent), insurance (59 per cent) and product input (45 per cent) costs are all above their historical averages, according to the February Business Barometer. And 38 per cent of businesses are now citing borrowing costs as a challenge, a new historical high and double the share from 12 months ago, it added.
“While the Bank of Canada has a core mandate to fight inflation and keep it reasonably close to the 2% target, our February data shows that a large part of the small business sector is currently under great financial pressure due to subpar revenues, accumulated pandemic debt and a rapid and significant rise in interest rates,” said Gaudreault. “The next few months will be critical to the future of many of them, and any fiscal or monetary policy decisions should be evaluated with that reality in mind.”
Marc Ercolao, Economist with TD Economics, said headwinds impacting the growth outlook for the Canadian economy are creating a mixed picture for small businesses. The uptick in confidence in recent months is welcome, but overall optimism is relatively blunted compared to historical levels.
“Small businesses are under greater financial pressure as the significant rise in interest rates continues to weigh on borrowing costs and debt servicing. The data suggests that businesses remain increasingly uncertain around the outlook over the next year–over 70 per cent have performance expectations of at least the same or worse over the next year. The consumer is also likely to be put under increased financial stress over 2023, which will weigh on both consumer spending and growth, ultimately affecting business’ bottom lines,” he said.
(Mario Toneguzzi is Managing Editor of Canada’s Podcast. He has more than 40 years of experience as a daily newspaper writer, columnist, and editor. He worked for 35 years at the Calgary Herald, covering sports, crime, politics, health, faith, city and breaking news, and business. He works as well as a freelance writer for several national publications and as a consultant in communications and media relations/training. Mario was named in 2021 as one of the Top 10 Business Journalists in the World by PR News – the only Canadian to make the list)About Us
Canada’s Podcast is the number one podcast in Canada for entrepreneurs and business owners. Established in 2016, the podcast network has interviewed over 600 Canadian entrepreneurs from coast-to-coast.
With hosts in each province, entrepreneurs have a local and national format to tell their stories, talk about their journey and provide inspiration for anyone starting their entrepreneurial journey and well- established founders.
The commitment to a grass roots approach has built a loyal audience with over 120,000 downloads and thousands of subscribers on all our social channels and YouTube. Canada’s Podcast is proud to provide a local, national and international presence for Canadian entrepreneurs to build their brand and tell their story.
