Business confidence for small and medium-sized enterprises has recovered most of the ground it lost during the middle of 2003.

Survey released results today by the Canadian Federation of Independent Business show that the multiple economic shocks experienced throughout many parts of Canada have largely passed and that a modest recovery is now underway.

Results from CFIB’s Quarterly Business Barometer for the third quarter show the business confidence index was at 107.7 in September, up 2.9 points from June’s level of 104.8, but down 1.6 points from the same time last year. The index is a key indicator by business owners about the expected performance of their own firm during the next 12 months.

CFIB chief economist, Ted Mallett, said firms exhibiting strength and optimism out-number those that show weakness in September, and expectations are generally more positive. He said that 39% of business owners say their firms are performing stronger, compared to one year ago, while 31% say they are doing worse. These results are similar to those registered earlier this year in March and June.

“Short-term expectations over the next 3 to 12 months show improvement from those expressed earlier this year,” Mallett said.

Mallett also noted expectations across industry sectors are consistent with the overall findings. The index rose across all 10 industry groups. He said the services sector is leading the way with improved optimism in social services, finance, insurance, real estate and business services. The manufacturing sector has also had somewhat of a rebound. Agriculture and construction continue to lag behind the other sectors, although both have shown some improvement since June.

The future employment plans among SMEs have also rebounded slightly since June. Overall, 29% of businesses surveyed plan to increase their full-time employment level during the next 12 months, while only 9% plan to lower it.

“Despite the improvement, full-time hiring plans have not recovered to the levels that we reported in 2002 and early 2003,” noted Mallett, “however some sectors are very upbeat about hiring.”

Capital spending expectations have not rebounded in the way that overall business expectations and hiring expectations have. Mallett said, “The most recent findings show that the number of companies planning to spend on replacement or additional capital items such as equipment, machinery and buildings continues to slide from those recorded in early 2002.”

The survey was conducted between September 3 and 12, 2003 and drew 2,820 responses from a stratified sample of CFIB members. The national results are accurate to within +/-1.9 percentage points 19 times out of 20. The next edition of the survey will be published December 17, 2003.