Canadian small firms doing well, despite fiscal crises in Europe, US
August 03, 2011
Small businesses in Canada seem to be faring better than their counterparts in the U.S., although a full recovery from the global economic recession remains somewhat elusive.
The most recent Business Barometer from the Canadian Federation of Independent Business shows confidence among the nation's small firms grew significantly in July, rising two points to reach 68.3 and ending months of declines.
The reading falls in line with average scores measured throughout the year and signifies a closing gap in optimism among the provinces. Alberta small businesses expressed the most confidence with a reading of 74.9, while companies in Prince Edward Island and Nova Scotia measured indexes in the low 60s.
"For the most part, it appears Canadian business owners are not seeing much turbulence from the sovereign debt uncertainties in Europe and the U.S," said Ted Mallett, vice president and chief economist for CFIB, in a statement. "Measures for new orders, inventories and overtime are up, compared to past months, and investment intentions have improved in all categories except vehicles."
Additionally, small businesses in the business services and transportation sectors showed the highest confidence, with readings greater than 70. Hospitality and agriculture, however, showed less enthusiasm.
While Canada may not be trembling through a debt crisis as severe as those in Europe and the U.S., the country is facing a decent share of economic challenges. Unemployment, for instance, remains relatively high, reaching 7.4 percent as of June. What's more, the rising cost of energy and commodities also has investors and small business owners alike uncertain about their own prospects.
"The result is that future pricing plans have come back below the 2 percent mark," Mallett added, "which the Bank of Canada considers to be the fulcrum of its monetary policy levers."
The CFIB Business Barometer has traditionally fallen between 65 and 75 during times of substantial economic growth, so July's reading of 68.3 should signify a growing economy looking for more robust expansion in coming months.
As the U.S. government narrowly avoided a default on its debts this week, Canadian investors may also begin to find solace in a slightly more tame business landscape.