MNI: Canada Recession Bell Rings In Small Business Barometer

Small firms have the dimmest economic outlook since the depths of the pandemic recession according to Canadian Federation of Independent Business figures published Thursday.

The monthly Barometer of 12-month sentiment fell 6 points to 48.7, the lowest since April 2020. The three-month indicator also declined 2 points to 45.5 to mark the third decline in four months.

The CFIB data is one of the richer and most current surveys of business conditions and showed weakness on other questions around hiring and and unfilled orders, while expectations for wage and price gains remained elevated. That's tricky for Bank of Canada officials who held interest rates at the highest since 2001 earlier this month and saw risks of over- and under-tightening as the economy slows.

Canada's GDP shrank at a 0.2% annualized pace in the second quarter and some economists see a recession at hand after a year when many forecasters were confounded by resilient consumer spending. To be sure, any technical recession stands to be mild with unemployment still within half a percentage point of record lows and some households holding onto pandemic relief checks. (See: MNI INTERVIEW: BOC Seen On Hold Until Mid-2024 Cut- Stillo)

One-third of firms in CFIB tracking said their unfilled orders are below normal, the highest since June 2021. The 16% of firms planning to hire full-time workers in the next few months was the lowest since February 2021. Small businesses with fewer than 100 workers account for 68% of Canada’s private-sector employment, and medium-sized companies with up to 500 employees make up another 21%. Those firms contribute about half of Canada’s GDP.

With the central bank concerned about sticky inflation, executives also said on balance they plan to raise prices 3.2% over the next year and wages by 2.6%, both higher than the BOC's 2% target.