Canadian small business leaders are rapidly losing confidence in the economy, according to the latest data from the Canadian Federation of Independent Business (CFIB). The organization's business barometer fell sharply in May, dropping below the critical 50 threshold to 46.3, a decline of more than 11 points from April. This marks the first time in recent months that the index has fallen below 50, indicating that a majority of businesses expect weaker performance over the next three to 12 months.
Every province and every sector reported a decline in confidence, painting a bleak picture for the Canadian economy. Andreea Bourgeois, CFIB's director of economics, noted that many small firms are stuck in a grind, facing weak demand and high costs, particularly for fuel. This environment is not conducive to strong orders or investment, she said.
Fuel Prices and Consumer Demand Key Concerns
Fuel prices remain the top sore spot for small business owners, with gas prices hovering around 180.4 cents per litre, down slightly from the monthly high of 190.4 cents on May 6. Oil prices have eased recently as US President Donald Trump suggested an end to hostilities with Iran, but West Texas Intermediate crude remains above US$90 a barrel. Weak consumer demand is also a major source of pain for businesses.
To cope with rising costs, small businesses plan to raise prices by an average of 3.1 per cent, which outpaces April's inflation rate of 2.8 per cent. Bourgeois warned that higher oil prices add upward pressure on inflation, while tariffs and other economic challenges continue to weigh on growth. With the Bank of Canada's next interest rate decision looming, businesses face a tough environment.
CEOs Also Pessimistic
The pessimism extends beyond small businesses. A January survey of 133 Canadian CEOs by PwC Canada found that only 47 per cent believe the global economy will improve in the next year, and just 27 per cent expect the Canadian economy to grow. This is a drop from the previous year, though PwC noted that the earlier survey was conducted before the trade war with the US became apparent.
Nicolas Marcoux, CEO of PwC Canada, remarked that for the first time in over five years, Canadian CEO sentiment is moving in the opposite direction of global optimism. He cited trade uncertainty, tariff pressures, and slower adoption of transformative technologies like AI as headwinds. However, he also saw this as a catalyst for Canadian companies to enter new sectors and build resilience.
The findings underscore a broad-based loss of faith in the economy, with both small business owners and corporate leaders expressing caution about the future.
