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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Look at the steady slope after Canada adopted a debt driven economy. Canada didn’t recover from the Great Recession. They just started living on borrowed time.
The CFIB has its’ perspective on small business. Small business’s are vulnerable. $3000 rent to a company that has fewer – or no – sales can’t afford to pay its rent, or pick up the remaining 25% of subsidized wages. It’s got ongoing expenses that may have been a struggle to pay before this nightmare.
The interesting thing for me is that the current economic climate is the ultimate leveler for all business, micro or massive. No business can survive under the conditions I mentioned. Adidas/Toyota/Meile (insert your preferred global brand here) can’t survive if significantly fewer people buy their products. No business is too big to fail if this carries on. And it’s global.
I’m starting to think that Canada may have actually dodged a bullet in 2009. I thought it was on delay, but reading this morning that the entire north American real estate market is facing collapse currently, history may show that the US had two fails and we may only have the one in play currently.
‘May you live in interesting times’ is an ancient curse. These are certainly interesting times.
That’s a naive take on real estate. Who’s the say the order of magnitude won’t be higher for Canada vs the US? We could end up where they were in one fell swoop instead of two. Our balance sheets as consumers is WAY worse going into this and real estate prices higher. We didn’t dodge anything. We just delayed it by extending cheap money.
‘dodging bullets’ is a metaphor for extending time even if eventually you get shot dead 🙂
I believe the next big layoffs will be governments.. The City of Vancouver just announced it’s basically bankrupt.. As individual CDNs are living on a knife edge from month to month so too are our governments, school boards, and districts.
My biggest disappointment is the cost of Charities.. CDN Charities have just announced they need government assistance in the amount of $8 billion to keep from laying off over 100,000 employees.
When registrared charities have a break even amount of $8 billion, then our society has a serious spending problem.
The property taxes on my house in Oakville were scheduled to increase to $15,000 per year, increased from $3,500 back in the day. So we sold to a foreign buyer in 2016. I have no idea how anyone will be able to pay taxes like that in the new economy. Vancouver may not be the only municipality seeing hard times.
Now that the real estate ponzi scheme is unravelling, why is it that the Bank of Canada has offloaded $150 billion of sub-prime mortgage garbage from the books of banks onto the backs of taxpayers (via CMHC)?
Banks profited from creating these junk mortgages on the way up. Their cronies at the CMHC insured this junk at well below market rates. No private insurers participated in the bidding so no price discovery occurred as to what insurance premium to charge on this junk.
Now taxpayers are supposed to eat the loss on the way down?
Sounds like a scam.