CANADA DATA: CFIB Small Business Activity Stabilizing, But Employment Weak

The CFIB 12-month Business Barometer picked in September back up above the 50 level demarking expected improvement vs weaker performance, to 50.2 from 48.3 in August. That means there have been 50+ readings in 2 of the last 3 months after five consecutive <50s. The survey covers Canadian small businesses' business outlooks, and has a (very) rough correlation with concurrent national GDP growth (see chart).

• Sectorally, improvements were broad-based, per the CFIB: "Some sectors saw improvements in long term confidence, such as transportation, agriculture, manufacturing, retail and information, arts and recreation. While the remainder saw small deteriorations."
• That said, employment indicators in the survey were weak, with negative staffing plans nearing the post-2021 low levels registered in March. 18% of employers are planning to lay off workers, with 12% considering hiring full-time workers.
• The biggest problem for small businesses was again "insufficient demand": "Weak demand persists for over half (55%) of businesses. About 20% of businesses reported distribution constraints, almost twice as high as the historical average."
• Inflation indicators were relatively tame, with the average price increase at 2.7% and average wage increase at 2.2% - each unchanged over the last 3 months.
• As with other survey indicators, the CFIB suggests some stabilization in growth versus the depths of the Canada-US trade war dispute, but the steady inflation trends and weaker employment outlook will add to impetus for another rate cut from the Bank of Canada by year-end.