Despite improvement in economic outlook, small enterprises still weighed down by supply disruptions and tight jobs market
While Canada’s independent enterprises are now seeing some reasons for optimism in the economy, small business owners’ confidence continued to shrink in May, according to the latest Canadian Federation of Independent Business (CFIB) Business Barometer survey.
The poll found small business confidence for the long and short term took a dip this month, with the 12-month outlook score declining three points to 61.6, and the three-month optimism index dipping two points to 58.8.
Despite the minor decline in small enterprises’ optimism, CFIB’s research also reflected an improvement in the overall state of the economy compared to previous months. In May, 43% of businesses said that they are in excellent form, compared to 16% who indicated they are in bad shape.
"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.
Plans for full-time staffing were positive as 30% of business respondents shared plans to hire in the next three months, while the number of businesses saying they will cut back stayed steady from April at 11%. Price plans remained high but stable (4.4% over 12 months), while plans for wage increases stood at 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,” Gaudreault said.
CFIB’s findings run parallel to another study from Scotiabank, which found that business owners expect a continued worsening of supply-chain issues for at least the next six months as geopolitical events such as the war in Ukraine continue to make themselves felt.
While the Canadian business community represented in Scotia’s survey showed hints of optimism amid the subsiding pandemic, they also remain vulnerable to broad market challenges as well as costs of borrowing that are expected to rise until 2023.
Among the firms surveyed by the Big Six bank, a third cited a shortage of input products as a limiting restraint in ramping up production. Following mass layoffs and an exodus from industries that wereheavily impacted during the pandemic, small and mid-sized business owners have also struggled to re-fill vacant positions over the course of the recovery, brining unfilled job vacancies to historic levels.
With a persistent labour shortage seen as a drag to revenue growth, smaller firms are expecting to have to raise wages more on average compared to larger firms.