Canadian Small Business Confidence Continues to Improve

Long-term small business confidence is slowly regaining lost ground after crashing to historic lows in March.

The 12-month indicator added 5.3 index points, reaching 40 in May, according to the latest business barometer survey from the Canadian Federation of Independent Business (CFIB).

This marks the second consecutive month of gains. Long-term small business confidence was up 9.3 index points in April.

“Now that the federal election is over, there may be clearer guidance and renewed leadership on tariffs and other federal matters, and this and a somewhat de-escalating trade war may explain in part why small business sentiment is trending in the right direction again,” says Simon Gaudreault, chief economist and vice-president of research at CFIB. “However, these are just timid beginnings of a rebound. The indicator is still well below its historical average. The optimism glass is not even half-full, it’s still fairly empty.”

All provinces have their confidence levels below 50. Weak demand remains the top barrier to growth for 59 per cent of businesses, while more than two-thirds are constrained by tax and regulatory costs. Hiring intentions are far below seasonal levels, with 14 per cent of businesses looking to hire full-time in the next few months and 16 per cent planning to lay off.

Inflation pressure indicators have eased, with small businesses planning to raise prices by an average of 2.9 per cent, down from 3.5 per cent in April. Wage plans remained unchanged at 2.1 per cent.

“Many small businesses are breathing a sigh of relief as it seems we’ve avoided the worst of tariffs,” says Andreea Bourgeois, director of economics at CFIB. “But there’s still lots of uncertainty around, putting long-term investments and business planning on hold.”