Small business mood signals growth

With its seventh-consecutive monthly gain since late last summer, small business sentiment has now reached a stable level and will support sustainable economic growth, according to the Canadian Federation of Independent Business’ (CFIB).

Its Business Barometer Index climbed to 67.7 in March, more than a point and a half above February’s level and six points above its August 2011 low. A reading over 65 or higher signals growth.

“Even though government debts continue to cast a shadow, the small business community is confident that increased government spending restraints will help to encourage domestic business activity,” says Ted Mallett, vice-president and chief economist for CFIB.

Business owners in Alberta (74.6) and Saskatchewan (72.0) remain the most optimistic in the country, while Ontario (68.2) beats the national average for the first time in over a year.

Optimism in Manitoba (69.8), Quebec (64.6) and Nova Scotia (64.1) also improved, while levels fell back in British Columbia (63.8) and New Brunswick (66.0).

Mallet says businesses in the arts, recreation and information products industries are the most optimistic about their year ahead, pushing their index beyond the 80 mark for the first time.

Manufacturers are also more positive, along with the natural resource industries and businesses in the health and education sectors. Those in transportation, hospitality and business services are at the low end of the index—around the 60 level.

Planned hiring took a big swing to the positive in March, with 20% of business owners planning to increase full-time staffing levels in the next few months and with only 11% cutting back.

“While these numbers are heavily influenced by seasonal business patterns, they match March 2011 findings and are better than findings last year,” says Mallett. “Small business owners expect to increase wages an average of 1.7% and prices by 1.5% over the next year.”

In addition, 46% of business owners expect their businesses to strengthen in the next three or four months, compared to only 13% who expect them to weaken.

Capital spending plans continue to show a stable profile for March, with 35% of respondents expecting to invest in office or communications technology in the next three months. Confidence for planned investment in land and buildings is also above trend.