2016.04.2901:37:00UTC+00Canada’s Small Business Sentiment Rises Considerably in April, But Likely to Recoil in Near Term

A considerable improvement was seen in sentiment amongst Canada’s medium-sized businesses in April. The CFIB business barometer index rose to 59.2, rising by 6.9 points. The rise in sentiment was widespread, noted TD Economics. Out of 13 sectors, notable rebound of between 1 and 8 points were recorded in eight of the sectors in April. Hospitality, retail and construction sectors recorded huge gains in sentiment, while confidence continued to fall in natural resources, agriculture and transportation.

Region wise also the improvements in sentiment were widespread. Out of 10 provinces, confidence rose in six of them. In Prince Edward Island, sentiment surged nearly 12 points, rising to 70.8 in April, while, confidence in Ontario also rose decently by 5.6 points, which assisted in increasing the national average. Also, sentiment spiked by around 2 points in Saskatchewan and Alberta; however, both provinces continue to be in contractionary territory.

Nonetheless, there continues to be certain underlying weakness in business conditions based on the comparatively weaker readings of accounts receivables, unfilled orders and hiring intentions, said TD Economics.

Overall, this seems to be an upbeat report with sentiment gains recorded both sector wise and region wise. However, there are certain underlying frailties, according to TD Economics. The index has certain inherent volatility. Even if the sentiment is expected to pullback in the near term, the extent of April’s gain implies that optimism in small business might have already troughed, noted TD Economics.

The rebound in sentiment in Saskatchewan and in Alberta is mainly due to the recent increase in oil prices. Even if the volatility is expected to continues, oil prices are likely to continue increasing gradually and reach USD 50 by the end of 2016, said TD Economics. While this will not be sufficient to increase business investment, it will assist in easing certain worries of small businesses in those two regions.