BMO: Small businesses set to grow in Canada
March 05, 2012
Canadian small businesses are poised for strong growth in 2012, according to a recent report from BMO Economics. A resurgence in demand, heightened productivity and overseas competition are driving the nation's entrepreneurs and small business owners to invest in hiring and expansion efforts.
Much of this trend has been witnessed in the surge in equipment financing activity. Analysts have often looked toward such trends as indicators of coming economic growth, as business owners tend to invest in equipment when sales start to improve. It may also be a sign of entrepreneurial ingenuity and corporate innovation.
"Upgrading equipment is a step in the right direction, but it's also critical how efficiently businesses use the equipment and labor supply," said Doug Porter, deputy chief economist at BMO Capital Markets. "At the same time, policymakers must do whatever they can to support innovation and competitiveness."
"Further growth in business investment outlays will be critical in this effort," Porter added. "Relatively strong finances and supportive financial conditions should spur such capital spending further in the coming year."
However, gauges of small business activity remains somewhat tepid. Last month, the Canadian Federation of Independent Business reported a mild increase in its Business Barometer Index for January. The index reached 65.2 points, slightly higher than the 65 points noted in December but otherwise statistically insignificant. That figure is also below much of the readings in 2011, suggesting the small business sector may be stalling in its emergence from the recession.
BMO analysts pointed to the need for advocates and policymakers to focus on industries such as construction, retail, professional services and truck transportation, as these markets tend to have a high concentration of small companies, which account for roughly half of Canada's private sector workforce. However, these industries have suffered volatile recoveries in recent years and are largely impervious to growth projections.
Many of the challenges facing Canada's small business sector are also unfolding in the U.S. and Europe. For example, the country's aging workforce, rising healthcare costs, shifts in labor demands and other trends are also commonplace in the U.S. BMO points out that new technologies can be leveraged to stay in pace with the rapidly changing marketplace.