CFIB Small Business Barometer (September 2022)

Rishi Sondhi, Economist | 416-983-8806

Date Published: September 29, 2022

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Canadian small business confidence declines in September   

  • The CFIB Business Barometer, a measure of small business confidence about the next 12 months, decreased by 1 point to 52.5 in September. Meanwhile, the more immediate 3-month ahead outlook shed half a point, landing at 49.5.  
  • Capacity utilization dropped 2.4 ppts to 76.6%. Meanwhile, near-term hiring plans were weaker during the month, with 17.6% planning to add to their payrolls in the next 3-4 months, down 2.7 ppts from August. 
  • The percent of firms indicating shortages of both skilled and semi/unskilled labour fell further in September, but remained near historical highs. The former dropped to 53.3% (a 6 month low), while the latter dipped to 36.4% – marking the lowest reading since March. Meanwhile, worries about supply chains increased in September, but remained below their peak from earlier in the year. 
  • On cost pressures, the share of firms reporting difficulties due to borrowing costs increased touched a new high. However, those related to fuel, energy, and wages dropped.
  • Small businesses expected to raise prices by 4.0% over the next 12 months, down 0.2 ppts from August. Meanwhile, expected future wage growth was flat at 3.1%, although still down from June's record high.            

Key Implications

  • Both near and longer-term small business confidence declined in September, with both indices remaining well below their respective long-run averages. Meanwhile, other activity indicators, such as capacity utilization and hiring plans, also softened. As such, today's report is firmly in line with our view for a significant slowdown in second half economic growth.
  • Another key takeaway from the report is that the backdrop for small and medium sized businesses may be becoming less inflationary, as growth weakens. For instance, cost pressures related to energy cooled markedly, while planned wage increases remained below their peak. In addition, small businesses expect to see less inflation in the prices they charge to their customers. What's more, labour shortages are slowly becoming less intense (although still highly problematic), suggesting that job markets may be loosening somewhat. Note that Canada's unemployment rate increased 0.5 ppts to 5.4% in August.