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economy

GEOFF CADDICK

The mood among small and medium-sized businesses is sinking, and it has been for months.

The Canadian Federation of Independent Business (CFIB) on Wednesday said its Business Barometer found that confidence declined in September, sinking a full point to 63.6 from August's "mediocre" level of 64.9.

"The reading is the fourth monthly decline in a row, and the fifth since March 2010's post-recession high of 69.9," the group said. "This latest result suggests the economy is truly kicking into low gear."

Business optimism fell in six of the 10 provinces, the CFIB said, but it was a six-point drop in Ontario that pulled down the national picture.

"Ontario small business confidence is now below 60 and at its lowest point since June 2009," the group said.

Among the various sectors, only agriculture, natural resources, manufacturing and wholesaling went against the declining trend. Construction had the worst reading, with a level of 51.6, down from an "already depressed" 59 in August.

"Business capital investment plans are moving sideways and employment plans have shifted to the negative … Not surprisingly, wage and price pressures are extremely light."

Toronto-Dominion bank economist Francis Fong said it's not surprising that businesses are cautious about hiring and spending "given the record debt loads currently being held by Canadian households and the uncertainty surrounding its potential impact on consumer spending."

Still, he noted, the index is still well above the 50 mark, indicating many more businesses expect a strong performance than the naysayers.

"A 63.6 print, though below the long-term trend, is still head and shoulders above the 39.4 low recorded in December 2008, and simply implies a moderation in overall output growth," Mr. Fong said. "Indeed, this is consistent with our view that the Canadian economy will continue to grow, but at a more tepid pace relative to that posted at the end of 2009 and beginning of 2010."

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