Small business confidence falls as labour shortages, fuel and energy costs pose major challenges: CFIB

Small business confidence over the long and short terms has dropped slightly in May, according to the latest Canadian Federation of Independent Business (CFIB) Business Barometer®. The 12-month outlook dropped by 3 index points to 61.6, while the three-month optimism index fell to 58.8, a loss of two points since April.

Despite the slight drop in small business sentiment, the general state of business is on the upswing and better than in the previous months, with 43% of businesses reporting being in a good state, compared to 16% who said they were in a bad shape. Labour shortages (54%) were the biggest factor limiting business growth in May, while fuel and energy prices continued to be the major cost constraint as reported by 76% of businesses.

“It’s encouraging to see more businesses being in good health after the last two years of uncertainty. However, some businesses still have a long way to go, with certain sectors, such as retail and agriculture, feeling particularly less optimistic about the future,” said Andreea Bourgeois, Director of Economics at CFIB.

Almost all provinces were more optimistic over the short-term, except Ontario, where businesses saw the biggest decrease (-5.6 points), and Quebec. Among sectors, hospitality saw the biggest short-term jump, up almost 10 points to 69.9, while retail had a sharp drop of 7 points to 53.3.

Full-time staffing plans are positive, with 30% of businesses planning to hire in the next three months. The share of businesses saying they will cut back has not changed since April (11%). Price plans remain high but stable (4.4% over 12 months), while wage increase plans have reached 3.5%.

“While we see some positive improvements in certain provinces and sectors, businesses continue facing challenges, from a shortage of skilled workers to wage and price hikes, that prevent them from fully recovering. These concerns have businesses feeling nervous and uncertain about what the future holds for them,” said Simon Gaudreault, Vice President of Research and Chief Economist at CFIB.