Canadian businesses are getting used to the lock down, but things are still going to get worse. Canadian Federation of Independent Business (CFIB) data shows an improvement of business sentiment in April. The improvement is still relatively mild, as most small to mid-size enterprises (SME) prepare for more layoffs over the next few months.
About The Data
Today we’re looking at the CFIB’s Business Barometer – a sentiment index. The CFIB is an organization that represents SMEs, with 110,000 members. The barometer is a snapshot of how a sample of those members feel about the economy during their monthly survey. Due to the rapid shift of the SME environment during the pandemic, they’ve scaled up the surveys to twice a month.
Reading it is about as straightforward as looking at your kid’s report card. If the index is below 65%, expectations are the economy will grow below potential. If it’s above 65%, the economy is growing better than it’s expected potential (it happens!). If it’s right at 65%, the economy is functioning at potential. Higher is better. Lower is worse. Onward.
Canadian Business Sentiment Improves, But Things Are Still Bleak
The initial shock is starting to subside, but SME operators still expect more bad things to come. The index reached 37.7% in the first week of April, up from a record low in the second half of March. The index read 49.8% in the first half of March, and 60.5% as recent as February. The sudden shift indicates businesses were optimistic at the beginning of this year, despite rising business insolvencies.
CFIB Business Barometer Index
An index of small business sentiment. An index level at 65 indicates the economy is growing at perceived potential.
Source: CFIB. Better Dwelling.
More Layoffs Are Coming
Further details from the survey show businesses expect things to get worse. Only 5% see adding full-time staff in the next 3 months, and less than one-tenth say their business is in a good state. To contrast, 63% of businesses say they have to cut full-time staff, and 58% say their business is in a bad state.
Government incentives improved the outlook, but reality is setting in. Ted Mallett, CFIB’s chief economist noted, “even more business owners are planning to lay off staff in the next three months than when we surveyed them two weeks ago.” Incentives like wage subsidies have relieved some of the pressure, but it’s near impossible to mitigate all of the issues that cropped up.
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