Falling dollar, oil prices, send business confidence to post-recession low

Toronto – A free-falling dollar and the decline of oil have driven Canadian small business confidence levels to new post-recession lows in January says the Canadian Federation of Business.

The CFIB’s national Business Barometer Index dropped to 54.3, about 10 points below the level associated with normal economic growth.

“We’re still caught in the throes of the fallout from the flailing resources sector that’s been sending Alberta spiraling downward and dragging the rest of the country along with it,” said Ted Mallett, Canadian Federation of Independent Business (CFIB) chief economist, in a news release. “The weak dollar is also sinking confidence – this month saw a record response (38 per cent) in businesses feeling squeezed by currency-related costs.”

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.

Optimism dropped three points in British Columbia to 62.8. Alberta set yet another Barometer record low, falling to 28.8, far and away the weakest in the country and 26 points below its score in January of 2015. Saskatchewan rose two points to 58.7, while Manitoba fell five points to 61.4. Ontario dropped to 58.4, its lowest mark since 2013 and well behind Quebec, which saw a two point jump to 61.2, one of its best readings since 2013. Newfoundland and Labrador’s slipped to 63.2. Nova Scotia fell two points, but its 69.0 mark is the strongest in Canada by far. New Brunswick’s confidence rose to 62.8. Prince Edward Island fell a point to 60.3.

The natural resources and construction sectors remain the weakest, while professional services, information and arts, and hospitality sectors are strongest.

“The lone positive is that the general state of business health is in line with past results,” said Mallett. “However, hiring and wage plans are weak for this time of year and a lot of businesses are continuing to struggle with insufficient domestic demand.”