Confidence has dropped among Canadian small businesses heading into the busy holiday shopping season, as retailers contend with economic and labour challenges, according to a new survey from the Canadian Federation of Independent Business (CFIB).

The November survey results published Thursday noted that optimism for the next 12 months had dropped to among the lowest recorded levels by the organization that represents small businesses.

Simon Gaudreault, chief economist at the CFIB, said high operating costs, lack of staff and interest rate hikes have left businesses uncertain about their futures, contributing to the low optimism levels that are unusual for the pre-holiday months.

“The situation remains sobering for many small businesses,” Gaudreault, who is also the CFIB’s vice-president of research, said in a written statement.

“The short-term and 12-month outlooks for retail, in particular, have been quite low for the past several months, which is not what we expect to see in the lead-up to the holiday shopping season.”

CONFIDENCE AT RECORD LOWS

An “optimism index” for the next three months was at 43.8, the survey found, while the 12-month index dropped 50 points, which the CFIB said was the lowest result reported outside 2008-2009 and in 2020.

Optimism was lowest for businesses in the financial sector, while the reported said retail showed the second-lowest optimism in its outlook for the next three months and the next year. Businesses in arts, recreation and information sectors retained “solid” optimism levels for the short and long terms, the CFIB said.

Manitoba and P.E.I. reported slightly more optimistic long-term outlooks, but the CFIB said outside those provinces, “virtually all readings are in an ultra-low territory that is usually visited around recession periods.” Ontario, where businesses are re-emerging from a long period of off-and-on pandemic-related shutdowns, had the least optimistic outlook.

WHAT'S LIMITING BUSINESS GROWTH?

Seventy-one per cent of businesses said fuel and energy was the top factor limiting their growth. Labour shortages were also reported as major hindrances to growth, with 53 per cent pointing to a shortage of skilled labour and 38 reporting challenges with unskilled or semi-skilled labour shortages.

Higher borrowing costs were causing difficulty for 35 per cent business owners in November, compared with 16 per cent in the same month last year, the survey found.

Manitoba and P.E.I. reported slightly more optimistic long-term outlooks, but the CFIB said outside those provinces, “virtually all readings are in an ultra-low territory that is usually visited around recession periods.” Ontario, where businesses are re-emerging from a long period of off-and-on pandemic-related shutdowns, had the least optimistic outlook.

Andreea Bourgeois, the CFIB’s economics director, said the results are a reminder to support small businesses over the holidays.

Methodology:

November Business Barometer: November findings are based on 719 responses from a stratified random sample of CFIB members, to a controlled-access web survey. Data reflect responses received from November 3 to the 11. Findings are statistically accurate to +/- 3.7 per cent, 19 times in 20. Every new month, the entire series of indicators is recalculated for the previous month to include all survey responses received in that previous month. Measured on a scale between 0 and 100, an index above 50 means owners expecting their business’s performance to be stronger over the next three or 12 months outnumber those expecting weaker performance. An index level near 65 normally indicates that the economy is growing at its potential.