Small business operators in Canada are seeing a period of optimism, the likes of which hasn’t been seen in over two years. According to a recent survey, such optimism almost indicates levels of consistent economic growth.

According to the Canadian Federation of Independent Business, its Business Barometer index rose for a second month, to a reading of 67.1 in May, a gain of 1.4 points from April’s reading. This month’s positive response is the strongest since March 2012 when the index was at 67.7.

A reading higher than 50 indicates a majority of small business owners are optimistic about expectations of performance in the coming year and outnumber those anticipating weaker growth.

According to Admir Kolaj, an economic analyst at TD Economics, “An index level between 65 and 70 is typically in line with an economy growing at its potential”.

The May reading on small business confidence is consistent with economic growth likely to hold at a steady rate of at least 2% throughout 2014.

May’s strong optimistic outlook was spread across seven of Canada’s 10 provinces while business owners in Ontario, Saskatchewan and Newfoundland and Labrador were the only ones to indicate less optimism in May than in the previous month, although their readings were still around the 65 level or more. New Brunswick, Nova Scotia, Prince Edward Island  remained steady or slightly higher, but still below the 60-point level.

Ted Mallett, CFIB’s vice-president and chief economist says, “Owners in business services, natural resources, information and retail are the most optimistic. Business owners in hospitality, wholesale, agriculture and manufacturing are the least optimistic, but not by a large margin.”

Signals from other indicators are showing strength, too. Following a bleak winter, unfilled orders and accounts receivables have picked up while capital spending plans remain near post-recession highs. Similarly, full-time hiring plans are at a high compared to May levels in previous years.

After the severe winter months, the more positive small business responses in April and May paint a very hopeful picture for Q2. The improving weather conditions will only continue to lift confidence in industries such as retail, transportation and hospitality.

Source: Financial Post