September 13, 2013
Small businesses in both Canada and the U.S. are more bullish on growth
According to recent surveys, small businesses on both sides of the Canada/U.S. border are significantly more upbeat about their economic prospects over the next 12 months than they were at the beginning of the year.
Turning first to the U.S., three recent surveys of small business sentiment indicate that business owners’ optimism about their near-term prospects has increased over the past few months.
First, the Wall Street Journal/Vistage Small Business CEO Survey’s Confidence Index printed at 104.2 in August of 2013, up 11.2% from its year-ago level.
According to the survey of 678 business owners, 73% expect stronger revenue growth while 53% see an improvement in their bottom line, the highest reading since the survey was initiated in June of 2012.
Although the National Federation’s Index of Small Business Optimism at 94.1 is still well below 100, its average over the past 35 years, the net percentage of firms which indicated it was a “good time to expand” reached 9 in July, its highest level since December of 2011.
This more positive outlook for U.S. economic activity was reinforced by the Q3/2013 Wells Fargo/Gallup Small Business Index which came in at +25 in the quarter, its highest value since the third quarter of 2008.
According to the survey, which was conducted during the fourth week of July, small business owners were more optimistic about their ability to access credit, had observed an improvement in their local housing markets and reported an increase in capital spending.
The picture reflecting the level of business optimism among small businesses in Canada painted by the Canadian Federation of Independent Business (CFIB) appeared to be just as bright as in the U.S.
In August, the CFIB’s Business Barometer increased by 1.7 to 65.9, which was just short of the 66.2 it reached in February of this year.
According to the CFIB, readings between 65 and 70 usually indicate that the economy is growing at its potential.
Across the country, sentiment increased in seven of the ten provinces led by Ontario, Saskatchewan and Newfoundland and Labrador. Small business owners in Quebec and Manitoba appeared somewhat less positive about their local prospects.
From an industrial perspective, business sentiment was particularly strong in agriculture, manufacturing, retail and professional services. Consistent with a mixed pattern of both residential and non-residential building and the relatively soft pattern of commodity prices, business sentiment in construction and natural resources was subpar in August.
If just one survey of small business confidence was pointing higher it would be relatively easy to dismiss as a possible outlier.
However, the consistent pattern of the three U.S. surveys and the broad-based Canadian survey appears to be sending a much more positive signal about the near-term economic prospects for economic activity in North America.
Data Sources: Canadian Federation of Independent Business and US National Federation of Independent Business
Chart: Reed Constructton Data, CanaData