Drop in B.C. business optimism cited as omen for economy

Fiona Anderson, Vancouver Sun, Thursday, March 27, 2008

Business optimism in British Columbia is dropping and it could be a sign of a turn in the economy, according to the Canadian Federation of Independent Business.

B.C.'s business barometer, an indicator developed by the CFIB to measure optimism among small and medium sized businesses, works from a base of 100 set in 1988. It is now at 107.7, above the national average of 104.0, but the lowest B.C. has seen since 2003. It's also the second quarterly drop in a row.

And that's a concern, CFIB's vice-president for Western Canada, Laura Jones, said in an interview.

CFIB's barometer readings are often a leading economic indicator, predicting future trends, Jones said. That's because the survey goes to the source, asking business owners on the ground how they see the future.

"When the B.C. economy turned around in 2003, our quarterly business barometer was one of the first indicators out there," Jones said. "And sure enough, that ended up being the beginning of B.C.'s boom."

"If it's like 2003, this is the prediction of the turn," she said.

So this is not the time for the B.C. government to get complacent about the economy, Jones said.
"In B.C. we're so used to the economic good times it's hard to remember back to when there were bigger challenges," she said. "And there are bigger challenges."

Across the country, business owners in Prince Edward Island had the least positive outlook at 96.9. Even Alberta --which along with B.C. has led the country in business optimism over the past five years -- was below the national average at 102.8. Topping the barometer were Newfoundland and Labrador with a reading of 119.6, followed closely by Saskatchewan at 116.1.

Optimism also varied across industries, with a gloomy outlook in manufacturing, agriculture and transportation, while businesses in the finance, health care and education sectors saw a rosier future.

In B.C, more than half of businesses that responded to the survey said they expected their businesses to improve over the next 12 months, a drop from the 58 per cent that felt that way in December.

At the same time, one-third of provincial businesses surveyed expected to increase their number of full-time employees, down from 41 per cent.

Sixty-nine per cent of provincial respondents expected energy costs to continue to rise, up from 55 per cent in December.

That may be a reflection on B.C.'s new carbon tax, coming out in July, Jones said. "Energy prices are a huge concern for business owners and introducing a carbon tax into that mix certainly isn't instilling a whole lot of confidence," she said.

But across Canada, 71 per cent of businesses expected energy costs to worsen, even in the absence of a carbon tax. But Jones said B.C. businesses shouldn't be too pessimistic. "We are still higher than the national average," she said. "But the main message for government would be that this is really not the time to get complacent about the economy."