Small business confidence continues to plummet in Canada, according to new survey data from the Canadian Federation of Independent Business (CFIB), as companies grapple with rising costs and labor shortages.
The CFIB says its latest business barometer found that more businesses are feeling less optimistic going into the holiday season. The 12-month optimism index dropped to 50 points, a level not seen since the pandemic-induced economic slowdown in 2020. Outside of the 2020 decline, November’s drop is the lowest level recorded since 2009. The CFIB says an index level near 65 normally 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.
“High costs of doing business, a lack of staffing and ongoing interest rate hikes make it harder for them to know for sure where their business is headed.”
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 fight soaring 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 top factor limiting business growth is fuel and energy costs, followed by a shortage 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, particularly those in the retail industry. While the retail sector typically sees optimism levels rise during the holiday season, the outlook for retail businesses remains grim, dropping to the third-lowest level in the last 12 months.
An Equifax Canada survey released last week found that 60 per cent of Canadians say they will be spending less on gifts this holiday season due to inflation. Equifax Canada also found that just one in four (25 per cent) small business owners say they were feeling more confident about the 2022 holiday season compared to 2021, a decline from last year when 36 per cent felt more confident.
“For many, the usual boost they expect to see from holiday sales is not looking as promising this year,” CFIB’s director of economics 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’s monthly business barometer survey in November was based on 719 online responses from business group members, with a margin of error of +/- 3.7 per cent, 19 times out of 20.
Alicja Siekierska is a senior reporter at Yahoo Finance Canada. Follow her on Twitter @alicjawithaj.
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