Canada’s small business sentiment rises in May to highest in two-and-a-half years

Canada’s small business confidence rises in May to highest point in two and a half years. The CFIB’s Business Barometer index was up 1.6 points, reaching 66. The sentiment index is back near levels seen before the collapse of oil prices that began in mid-2014.

Sentiment in the oil-producing provinces of Newfoundland and Labrador, Alberta and Saskatchewan continue to be low. However, Alberta’s sentiment index has improved by 25 points since November. The most positive provinces in May were British Columbia, Prince Edward Island and Ontario. Positive readings in the remainder of the provinces, except New Brunswick, remained clustered near the 65-point mark.

Sector wise, professional and business services; finance, insurance & realty; and health & education recorded above 70 level in May. Hospitality and manufacturing were close behind. On the other hand, construction and natural resources were the least optimistic sectors, with the latter registering the third straight monthly fall.

Most other underlying indicators showed upbeat signs. The share of business owners stating that their business is in good shape was up to 43.2 percent, whereas above normal unfilled orders were up to 16.5 percent. Even employment and capital expenditure plans indicated notable improvements.

Small business sentiment is now close to levels seen before the collapse in oil prices. Even of regional variations continue, underlying indicators are usually indicating upbeat signs, with very encouraging rebounds in the state of business and employment and investment plans.

The progress in small business optimism in April and May shows continued economic growth in the second quarter that is expected to come in above 2 percent, slower than last quarter’s estimated 4 percent.

Beyond the near term, several factors augur well for small business confidence and economic growth in general, such as resilient consumer, accommodative monetary policy, further upside in oil prices and a rebounding U.S. economy, stated TD Economics.