Canadian small businesses appear more confident in the economy and their own financial prospects last month, according to a recent report from the Canadian Federation of Independent Business.

The CFIB's October Business Barometer climbed to 63.6, nearly a point higher than the previous month's reading of 62.7 and markedly higher than August's level of 61.7. While the readings over the past few months all suggest an expanding economy, economic uncertainty in the U.S. and Europe may be racking sentiment and holding the market back from its full potential.

"Judging from past history, index levels in the low 60s are still associated with economic growth in Canada, but only just," said Ted Mallett, vice president and chief economist at the CFIB. "Performance may not be stellar, but at least this latest data suggest economic growth has not turned negative."

Saskatchewan and Alberta led the rest of the country in business owner optimism, with index readings of just below 74. Nova Scotia and New Brunswick, however, failed to breach the 60-point level, suggesting weaker economic growth than their sister provinces.

The overall surge in confidence was driven mainly by activity in the manufacturing, wholesale and retail sectors, while the transportation and financial services markets suffered a decline in business optimism.

"Regardless, more business owners are saying their recent performance has been better than at any time since the recession began," Mallet pointed out. "After falling back significantly in August and September, amid economic uncertainty, business owners seem to have restored at least some of their capital spending plans."

Forty percent of business owners describe their businesses as being in "good" shape, compared to a mere 13 percent who would describe conditions as "poor," he added.

Conditions in the U.S. continue to progress at an anemic pace, with high unemployment, consumer debt and general economic fear. That financial problem has been compounded by ongoing debt crises in Europe, namely the threat of a default on Greek credit and similar problems in Italy, France and elsewhere. The slowdown in market activity on both sides of the Atlantic has had an indirect impact on the Canadian economy, which is heavily dependent on trade with the U.S. and Europe.

To lessen its dependence, Canada has been ratcheting up trade and outsourcing deals in Asian markets, principally in emerging economies such as China and the Philippines.