CFIB Small Business Barometer (January 2023)

Ksenia Bushmeneva, Economist | 416-308-7392

Date Published: January 26, 2023

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Small business confidence improves modestly in January

  • The CFIB Business Barometer, a measure of small business confidence about the next 12 months, edged up by 0.5 points to 51.4 in January. The more immediate 3-month ahead outlook also improved, gaining 7.1 points, however at 47.1 it remains in contractionary territory. 
  • Worries about cost pressures continued to subside but remain an acute pain point for small businesses. The share of respondents who stated that the cost of fuel and energy was causing difficulties was 67%. The cost of input products and wages were causing challenges for 48% and 60% of survey respondents, slightly less than in recent months but still very high relative to the pre-pandemic averages. 
  • Rising interest rates also led to an increase in the share of businesses worried about borrowing costs in recent months. This share stood at 37% in January – unchanged from December, but up from 22% a year ago and an all-time high for the survey. 
  • On the bright side, there were further signs in today's report that hiring challenges continued to abate in January. Shortages of skilled and semi-skilled/unskilled labour were reported to limit growth for 46% and 29% of survey respondents, down from 51% and 38%, respectively, in the month prior. 
  • Supply chain challenges also continued to recede, with significantly fewer firms reporting that a shortage of input products or distribution constraints were restraining their business' capacity. While those areas had improved, worries about insufficient domestic demand were on the rise. 
  • Planned wage increases for the year ahead remained unchanged from the month prior at 3%, but were down from their peak of 3.6% in June. 
  • Inflationary pressures cooled off further in January. Average price plans for the year ahead declined by 0.7 points to 3.6% - the lowest reading since July 2021.            

Key Implications

  • Small businesses started the year on a slightly better footing. Evidently, many of last year's gremlins, such as supply chain backlogs and labour shortages, are now retreating. 
  • Still, business sentiment remains subdued. Cost pressures are still acute, and some, such as the cost of borrowing or servicing existing debt have intensified. More businesses also expect weaker sales in the year ahead amid rising concerns about insufficient domestic demand. This is in line with our economic outlook, with growth and consumer spending both expected to slow this year, weighing on businesses' profitability.