Two entrepreneurs working on their bills in the retail store

Canadians’ confidence in their personal finances and in small businesses have dropped dramatically over the last month.

Insolvency firm MNP’s quarterly consumer debt index — which tracks Canadians’ attitudes regarding their debt situation and their abilities to meet their monthly payment obligations — registered its lowest reading in December since the index launched in 2017. The score of 88 dipped seven points from 95 in September.

Compared to Q3 2021, fewer Canadians are confident they can comfortably cover their living expenses in the next year, down five points to 55%. More are concerned about their current level of debt, at 43%, an increase of five points.

Only about one-quarter (27%) are confident in their ability to deal with life-changing events without increasing their debt burden.

“Canadians’ financial optimism typically wanes as the holiday bills become due, but this year more than any other, Canadians are feeling more financially insecure, likely as a result of the omicron variant and resulting pandemic fatigue, along with rising inflation and the potential for interest rate increases this year,” said MNP president Grant Bazian in a release.

About two in ten (16%) Canadians noted their debt situation is worse than a year ago, attributable to factors such as inflation and cost of living increases. Almost half (45%) said they regretted the amount of debt they had taken on.

Small business owners’ confidence also plummeted in the latest monthly reading from the Canadian Federation of Independent Business (CFIB).

As many regions face renewed Covid-19 lockdowns, short-term small business confidence — based on three-month forward expectations for business performance — dropped 10 points to 34.5 compared to December. Long-term small business confidence — based on a 12-month outlook — dipped 9.8 points to 52.4, which is the lowest reading since April 2020.

Among the 503 CFIB members who responded to the survey, 24% estimate they’ll reduce full-time staff in the next three months, while only 16% planned to hire.

About three in 10  (31%) indicated the general state of their business health was “bad,” with roughly the same number (29%) saying business was “good.”

“The last time optimism was this low was in the spring of 2020,” said Simon Gaudreault, vice-president of national research at the CFIB, in a release. “We are once again seeing negative staffing plans and more owners who say their business is in bad shape than those who say it is in good shape.”

A shortage of skilled labour is hurting growth for many businesses, the survey found, and wage costs were the biggest cost constraint.

MNP’s consumer debt index was compiled by Ipsos between Dec. 1 and Dec. 7, 2021. The survey had a sample of 2,000 Canadians aged 18 years and older.

The CFIB barometer data reflects responses from 503 CFIB members received on Jan. 6 and Jan. 7, 2022.