by Morinville Online Staff
The small business optimism index, which had been on a positive trajectory for seven consecutive months, experienced a notable decline of 2.1 points in June, settling at 54.1, according to the latest report from the Canadian Federation of Independent Business (CFIB) Business Barometer.
Although this drop in optimism is cause for concern, Atlantic Canada emerged as a relatively optimistic region in June, benefitting from the commencement of the summer tourism season. All four provinces in the region reported long-term confidence indexes exceeding 60.
The retail sector suffered the most significant blow to long-term optimism, plummeting by 10.8 index points to reach a score of 44.3, remaining at the bottom of the optimism scale. Conversely, the information and recreation sector claimed the top position in the sector rankings with a score of 69.1.
Simon Gaudreault, Chief Economist and Vice-President of Research at CFIB, expressed apprehension regarding the findings, stating, “National small-business optimism, as measured through our index, remains well below its historical average of 61. Meanwhile, other results from our tracking survey indicate early signs of an economic slowdown. Price, labour, and demand indicators all show results consistent with an economy that is losing momentum.”
The CFIB report revealed additional noteworthy changes in key economic indicators. The Consumer Price Index dropped to 3.4% in May, the lowest level since June 2021. Moreover, the pressure on average wage and price plans eased in June. Average price plans saw a substantial decrease, reaching 3.3% – one of the largest declines this year. Small businesses anticipate an average wage increase of 2.9% over the next 12 months. However, these figures demonstrate a clear downward trend since peaking during the same period last year.
The CFIB Business Barometer® also pointed to a potential cooling of the labour market, with 45% of businesses reporting that shortages of skilled workers are impeding their operations – the lowest share in nearly two years. For semi- or unskilled workers, the situation appears relatively stable, with 34% of firms indicating that shortages are hindering their progress. Furthermore, fewer employers (18%) are actively seeking to hire in the upcoming three months compared to 22% in May and 23% during the same period last year.
Andreea Bourgeois, CFIB Director of Economics, shed light on the labour market dynamics, stating, “The demand for labour typically strengthens at this time of year. Small business owners may be adjusting to labour shortages by reducing hiring and choosing to work longer hours themselves or scaling back services. Additionally, increased immigration rates mean there is an influx of candidates in the job market. While immediate hiring may not be possible, this influx should ultimately assist employers in finding qualified staff.”
Moreover, the share of businesses reporting insufficient domestic demand rose to 32%, reaching its highest point in two years. This figure has shown a clear upward trend since reaching a low of 21% in June 2022, inching closer to the historical average of 36%. Furthermore, more firms are reporting unsold inventories, indicating a gradual normalization of the unfilled orders indicator.
Gaudreault concluded by emphasizing, “While it is important to note that one month does not establish a definitive trend, several signs indicate that we may finally be witnessing a cooling of the economy.” CFIB will continue closely monitoring these developments as businesses navigate the evolving economic landscape.