Small business confidence in Canada continues to fall 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 has found that more companies are approaching the holiday season less optimistically. The 12-month optimism index fell to 50 points, a level not seen since the pandemic-induced economic slowdown in 2020. Barring the 2020 drop, November’s drop is the lowest since 2009. The CFIB says the index’s normal reading near 65 suggests the economy is operating at its full potential.
“The situation remains sobering for many small businesses,” said Simon Gaudreault, CFIB’s chief economist and vice president for research, in a statement.
“High costs of doing business, a shortage of staff, and continued hikes in interest rates make it difficult for them to know for sure where their business is going.”
The CFIB survey found that rising borrowing costs are troubling 35 percent of business owners, down from 17 percent last year. The Bank of Canada is in one of the most aggressive tightening cycles in its history as it tries to combat rising inflation, and has made six straight rate hikes since March, bringing the policy rate to 3.75 percent.
The survey also found that 71 percent of companies say the top factor limiting business growth is fuel and energy costs, followed by a shortage of skilled (53 percent) and “skilled/unskilled” labor (38 percent) .
The results come ahead of the holiday season, a crucial time for many small businesses, particularly in retail. While the retail sector typically sees rising optimism during the holiday season, the outlook for retail businesses remains bleak, falling to the third lowest level in the last 12 months.
An Equifax Canada poll released last week found that 60 percent of Canadians say they will spend less on gifts this holiday season due to inflation. Equifax Canada also found that just one in four (25 percent) small business owners said they were more confident going into the 2022 holiday season than they were in 2021, down from last year when 36 percent felt more confident.
“For many, the usual boost they’re expecting from holiday sales isn’t looking so promising this year,” CFIB economics director Andreea Bourgeois said in a statement.
“With the big shopping events – Black Friday, Small Business Saturday and Cyber Monday – approaching this weekend, this is another reminder to support local businesses.”
The CFIB monthly Business Barometer survey for November was based on 719 online responses from members of the corporate group with an error rate of +/- 3.7 percent, 19 out of 20.
Alicja Siekierska is Senior Reporter at Yahoo Finance Canada. Follow her on Twitter @alicjawithaj.
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