Small businesses signal green shoots for Canadian resource sector

Highest level of confidence since June 2014: Canadian Federation of Independent Business

springback.gifCanada's small businesses are quite a bit more upbeat in February, according to Business Barometer, a monthly index put out by the Canadian Federation of Independent Business (CFIB). The index rose 2.7 points to 62.9 this month—its best reading since January 2015.

Resources sector owners are now the most upbeat with an index reading of 69.2, the highest seen since the 71.6 recorded in June 204 before the global energy shock sent oil and gas prices tumbling downward.

"The destabilizing effects of the oil price crunch on business confidence now appear mostly behind us," said Ted Mallett, chief economist at CFIB. “This new, more optimistic outlook in the resource sector is reflecting a more balanced effect across the country, though this has yet to translate into a higher expectation of new full time positions becoming available in the coming months.”  

On a scale between 0 and 100, an index above 50 means owners expecting their business’ performance to be stronger in the next year outnumber those expecting weaker performance. One normally sees an index level of between 65 and 70 when the economy is growing at its potential.

Improving perspectives in previously hard-hit Alberta (49.8) and Saskatchewan (57.7) helped boost the index, closing the confidence gap that opened up with the rest of the country when oil prices were depressed.

In British Columbia, where daffodils are starting to poke through the earth signalling spring is ahead, confidence has tracked slightly downward month to month since Christmas but remains well above that seen one year ago. 

Other business operations indicators are suggesting a state of affairs that is not quite back to normal just yet. Business investment plans, new orders and accounts receivables conditions remain a little below par. Hiring plans are recovering from a late-2016 bout of pessimism, with 18 per cent of business owners expecting to hire full-time staff in the next few months, versus 12 per cent expecting to cut back.

“While these numbers are positive, we normally see better hiring plans laid out at this time of year,” explained Mallett. “More time is required to ensure that improving prospects actually take root for individual employers. For that reason, employment trends typically lag that of the economy in general.”

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