Small-business optimism wavered in March following three successive months of improvement, according to the latest Canadian Federation of Independent Business (CFIB) Business Barometer reading. The CFIB index fell to 65.9 points on a scale of zero to 100 in March, down from 69.5 points in February. A value above 50 means the number of businesses surveyed that anticipate a more positive business outcome over the year ahead outnumber those with a negative view.
Despite the dip, B.C. confidence trailed only Prince Edward Island, Nova Scotia and Quebec, and compared favourably with a national reading of 60.7 points.
Economic growth is forecast to slow from above 4% in 2017 to a more modest 3% this year and 2.3% in 2019, which is likely to correspond to a dampening of the index value. Optimism might also be reduced by capacity constraints of a tight labour market and rising wages.
Rising costs are already a reality as wage earnings growth picked up steam for a second straight month in January with a 3.3% year-over-year gain to $961, up from a 2.8% increase the previous two months. In comparison, national weekly earnings rose 3% over the period. Relative to December, earnings rose a solid 0.4%, extending the upward trend in gross weekly earnings going back through 2017.
Workers in most industry sectors have experienced healthy gains in total pay over the past year. Smoothing out some monthly variation using a three-month average, year-over-year growth in average weekly earnings was strongest in mining, quarrying and natural gas (up 11%) and for those in the management of companies (up 19%). Utilities and real estate financing sectors were up about 9%, with growth of 7% in accommodations and food services, and a near 5% increase for health care and arts, entertainment and recreation. In contrast, lower earnings growth has occurred in the construction sector (up 1.4%), manufacturing (up 1.6%), administrative support, waste management and remediation (down 7%).
While various factors contribute to average weekly earnings growth including job market composition and hours worked (including part-time/full-time divide and overtime), the latest estimates point to rising wage inflation, which is consistent with low unemployment. Statistics Canada’s fixed-weight index of hourly earnings, which adjusts for compositional effects, has accelerated since mid-2017 and rose 2.7% year-over-year on a three-month average basis. •
Bryan Yu is deputy chief economist at Central 1 Credit Union.
