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National small business optimism near record low


December 17, 2008
By CNW Group Ltd.

Dec. 17, 2008 – Overall expectations among the owners of Canada's
small- and mid-sized enterprises (SMEs) has fallen to a near record low
of 86.1 in December, according to findings from the latest survey of
business optimism released today by the Canadian Federation of
Independent Business (CFIB).

Overall expectations among the owners of Canada's small- and mid-sized
enterprises (SMEs) has fallen to a near record low of 86.1 in December,
according to findings from the latest survey of business optimism
released today by the Canadian Federation of Independent Business
(CFIB).

Nationally, latest expectations push the December Business Barometer
index down from its previous cyclical low of 90.3 in October and early
November and further from a high of 101.8 in September. "Today's
conditions will almost certainly put Canada's GDP in reverse in the
fourth quarter," said CFIB's chief economist Ted Mallett, adding "the
decline could carry well into the New Year."

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The provincial picture

In this quarter, findings show results by the provinces differ very
little, with optimism falling in every region. The most optimistic
businesses reside in Saskatchewan, where the index barely tops the 100
mark. Next in line are businesses in New Brunswick and Newfoundland and
Labrador. B.C., which only two years ago had the most optimistic small
business sector, now has the least, dropping to an index level of only
82.9 and just under Ontario's 83.0. Alberta's small business owners are
also registering an index level of only 84.3. All other provinces are
registering around the weak national average in the high 80s or low 90s.

By sector


From commodities to industrial products, the sentiment remains negative
across the board. With index levels well below the September numbers,
businesses in the health and education sectors, business services,
finance and even hospitality show only a faint increase in December
optimism from levels of a few weeks earlier. The most negative news,
however, is optimism in the manufacturing sector, dropping to even
lower depths with an index level below 80, with wholesale and
construction sectors not far behind. The service sector, traditionally
the economy's fastest growing and the most insulated from economic
swings, shows the only sign of gain.

Retail spending

Retail performance this holiday season is turning out to be poor by
historical averages. With only 5 per cent of small business retailers
saying they are performing much better than a year ago, and almost
three-times as many doing significantly and measurably worse. Almost
one-quarter of retail respondents say they are performing somewhat
stronger and about a third are doing somewhat worse. The remaining 27
per cent have seen no significant change in their performance compared
to last year.

Employment, wages and pricing plans

Compared to general business sentiment and views on how external
conditions have changed, employment perspectives look almost positive
in comparison. The December index shows 19 per cent of business owners
expect to increase their full-time staff by this time next year,
although the cooling of employment plans has coincided with a sharp
reduction in the number of business owners expecting to give raises in
excess of 2 per cent, cut by more than half to 22 per cent, compared to
this time last year.

Although pressures on the cost of product inputs and energy have eased
in recent months, they still exert pressure on about half of all
businesses that are unable to lessen their load on their cost
structures. More than half of all business owners now say the overall
investment climate has deteriorated for their companies, compared to
three months ago. The price outlook has also eased off considerably.
Inflationary pressures are now far lighter than they had been in
September. Much of the price pressure however remains driven by
exchange rates. The rapid and unanticipated decline of the Canadian
Dollar relative to is U.S. counterpart has pushed up the price of
products imported from the U.S. In a reversal of traditional findings,
a higher percentage of business owners – 36 per cent – want a higher
Canadian Dollar compared to those who would like to see it decline
further – 25 per cent.

Signs of an economic slowdown are present everywhere in the economy.
But, Canada's entrepreneurial strength saved our economy from the
previous recession in 2000-01 when the tech bubble burst in the U.S.
And, with time and good fiscal management by governments to allow
markets to work effectively, one can expect the small business sector
to play a major role to pull the economy out of its current state.


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