Canada Markets

Canada's Business Confidence Plunges

Cliff Jamieson
By  Cliff Jamieson , Canadian Grains Analyst
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The CFIB's monthly business confidence index fell from 60.5 in February to 49.8 for the first half of March and to 30.8 in the second half, the lowest index reported on record (blue line). The agriculture component of the index moved lock-step, from 51.5 to 50 and to 29.2 in the last half of March (brown line). (DTN graphic by Cliff Jamieson)

The Canadian Federation of Independent Business monthly Business Barometer shows the March Index for business confidence across all industries taking a deep dive, "a month unlike any other in Canada's economic history." Unlike most months, two readings were reported in the month of March, with the national index for the 13 business sectors falling by 10.7 points in the first half of the month, while falling further 19 points in the second half of the month to 30.8.

An index below 50 is viewed as an industry or economy in contraction, while the index is reported as a three-month moving average, which indicates the March index could be overstated when data from 90 days ago are included. All 13 business sectors making up the Canadian Business Barometer Index dived lower this month, ranging from a drop of 18.6 points in the hospitality sector to a high of 38.2 points in the Info, arts and recreation category. As stated in the report, "It is an understatement to say the size and speed of these changes are unprecedented in our data," with this month's index below that of the global financial crisis in 2008.

The month-over-month changes by business sector show the agriculture index fall by 22.3 points, the third lowest drop of the 13 sectors, with seven of the 13 facing more than a 30-point drop. The agriculture index is reported at 29.2 for the second half of the month, with seven of the 13 business sectors reported lower. This is the lowest reading seen in data reported since Oct. 2000. Over the past year, the agriculture index has ranged from 44.6 to 51.9, while the 12-month average is 49.6.

The CFIB report includes a General State of Business Health chart for the agriculture sector, with the percentage of responses rated Good falling sharply this month to 22%, while the percentage of the responses rated as bad increased this month to 20% of responses.

The survey also shows that when asked what the limitations on sales of production growth are, the highest response or 34% of respondents chose insufficient domestic demand as their top choice, while a shortage of unskilled/semi-skilled labor was the top choice for 31% of respondents.

Major cost constraints selected by respondents are fuel and energy costs along with taxes and regulations.

The rapid rate of change has led the CFTB to release data twice each month over the next three months.

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Cliff Jamieson can be reached at cliff.jamieson@dtn.com

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