Small business confidence plummets amid high debt and interest rates, says CFIB

Business group says one-third of small business owners now say borrowing costs cause difficulty

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Small business confidence in Canada plummeted in October, falling to levels not seen since the start of the pandemic, according to new research released Thursday.

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The Canadian Federation of Independent Business said its latest business barometer found many businesses are struggling to repay debt accumulated during COVID-19 shutdowns as interest rates rise.

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A third of Canadian small business owners now say borrowing costs are causing difficulty, compared with about a fifth of businesses at the start of the year, the business group said.

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“Small businesses are facing a lot of worries right now,” Simon Gaudreault, chief economist and vice-president of research at CFIB, said in a statement.

“Many have yet to pay off the debt they accumulated during the pandemic, while facing another interest rate hike from the Bank of Canada due to the unresolved inflation problem.”

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The central bank raised its key rate by half a percentage point to 3.75% on Wednesday, from 0.25% in March.

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Among the provinces, Ontario has seen the lowest near-term outlook and the largest drop in confidence this month, CFIB said.

Companies in the retail sector showed the biggest drop in short-term optimism and were the least confident of the sectors surveyed, despite the approaching holiday shopping season, according to the CFIB.

Typically, the retail sector sees renewed optimism at this time of year, said Andreea Bourgeois, CFIB’s director of economics.

“It is concerning that the sector is posting such a negative outlook for the next three months,” she said. “It really speaks to the anxiety business owners feel about inflation and lower consumer spending intentions.”

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In its 2022 holiday retail outlook, Deloitte Canada said overall holiday spending is expected to decline this year as inflation reduces consumer purchasing power.

The Deloitte report, based on a Leger survey of more than 1,000 Canadians, found that 76% of respondents plan to limit their holiday spending due to rising food prices, followed closely by concerns over inflation and general economic concerns.

CFIB’s Monthly Business Barometer in October was based on 752 online responses from members of business groups.

The polling industry trade body, the Canadian Research Council, says online polls cannot be assigned a margin of error because they do not randomly sample the population.

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Stephen V. Lee