Small business confidence edged up in August, a sign of potential stabilization, according to data from the Canadian Federation of Independent Business (CFIB).
The federation’s business barometer, which measures business owners’ outlook for the next 12 months, increased by 0.8 of a point to reach 53.5 (out of 100) in August. In a release on Thursday, the CFIB described the result as “stable but low.”
“Small business owners continue to feel the pressures of higher costs and labour shortages, and they’re taking a wait-and-see approach,” said Simon Gaudreault, chief economist and vice-president of research with CFIB, in the release. “They are cautious about the future, and that impacts confidence, hiring plans and business growth plans.”
In commentary, TD economist Ksenia Bushmeneva said the positive change in business confidence, while small, marked the first increase since March and was “a first sign” of stabilization.
“Most indicators of business health were either stable or registered modest improvements,” Bushmeneva wrote.
The share of businesses reporting being in good shape increased to 37% in August, compared to 32% in July.
More than half of businesses (52%) experienced shortages of skilled labour — an “historically high” figure, Bushmeneva wrote, but down from about 56% in July. The share of businesses reporting shortages of semi- or unskilled workers was also down slightly.
Fuel and energy costs remained the top cost constraint for 72% of small firms, a slight moderation from the previous month.
Small businesses’ expectations for price and wage increases continued to soften. Price increases over the next 12 months trended down (4.2%) from May’s high of 4.9%, and average wage plans decreased to 3.1% after peaking at 3.6% in June.
Those results suggest inflationary pressure may be easing, Bushmeneva said: “This will be an encouraging sign for the Bank of Canada, as it is trying to contain inflation expectations and tame inflation.”
The business barometer was based on 682 responses from a stratified sample of CFIB members. The web survey responses were received between Aug. 2 and Aug. 18.