CFIB Small Business Barometer (September 2021)

Rishi Sondhi, Economist | 416-983-8806

Date Published: October 5, 2021

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Small business confidence tumbles in September

  • The CFIB Business Barometer, a measure of small business confidence in the next 12 months, tumbled by 9.2 points to 57.8, its weakest reading since November 2020. The more immediate 3-month ahead outlook fell even more, plunging by 12.7 points to 43.2. 
  • Despite the steep pullback in both near and long-term confidence, other indicators pointed to an improved state of business health. Capacity utilization rose for the fourth consecutive month to 74.8% (up from 73.6% previously). The share of firms that were barely operating (those with capacity utilization at or below 30%) fell to 6.4% – the lowest level since the start of the health crisis. Meanwhile, the percent of firms reporting their general state of business as "good" remained close to pandemic highs at 34.3%. Additionally, concerns about insufficient foreign and domestic demand continued to drop. 
  • Not all of the underlying details were positive however, as 18.3% of firms' planned to add to their payrolls in the next 3-4 months, down 6.9 points from August. Firms also remain gravely concerned about labour shortages with 82.5% reporting shortages of skilled and unskilled labour as factors restraining sales and production. The percent of firms citing input shortages as an impediment was also highly elevated at 26.7%. Encouragingly, both metrics were down slightly from August.
  • Businesses' intentions to raise wages and prices plans continued to percolate in September. Firms planned to increase their prices by 3.7% - slightly lower than August's all-time high – and wages by 2.6% over the next 12 months.       

Key Implications

  • Small business sentiment took a massive step back in September, which the CFIB attributed to election uncertainty (the survey was done before the election), new restrictions and some concern around vaccine passports. Ongoing supply chain bottlenecks and shortages of inputs and labour are also likely weighing on sentiment and businesses' ability to ramp up sales and production. Both of these issues were at the forefront in September. That said, not all metrics deteriorated in September, blunting some of the negative tone of the report. 
  • Inflation has reared its head in recent months and businesses are feeling the pinch of higher input costs. Plans to raise prices have been trending up since the start of the year, and those are yet to abate. We expect that recovering consumer demand and supply chain bottlenecks will likely keep prices elevated in the months ahead, with headline inflation expected to remain above 3% throughout the rest of this year.