The Canadian Federation of Independent Business said its long-term Business Barometer index dropped nearly 10 points to 47.9 in September. The index measures 12-month expectations on a scale from 0 to 100, and CFIB says a reading below 50 means more owners expect weaker business performance than stronger performance.
The short-term index, based on a three-month outlook, also fell by 10 points to 43.3.
Costs rose while demand stayed weak
The September report shows small firms being squeezed from both sides. CFIB said insufficient demand remained the top limitation on business and production growth, cited by 49% of small and medium-sized businesses.
At the same time, cost pressures remained broad. Fuel costs were the most commonly reported cost constraint, cited by 62% of firms. Tax and regulatory costs followed at 61%, while wage costs were reported by 60%.
That combination is harder for small businesses than a simple cost increase or a simple sales slowdown. When demand is soft, price increases become riskier. When costs keep rising, absorbing those costs can weaken margins and cash flow.
CFIB’s inflation indicators point to that pressure becoming more visible. Average price increase plans rose to 3.3% in September, up from 2.6% in August. Average wage increase plans were unchanged at 2.4%.
Tariffs and energy are adding to uncertainty
CFIB said firms involved in international trade showed lower optimism than businesses operating only in Canadian markets. Exporters fell to 38.6, while importers were at 43.5 in September 2026.
Statistics Canada’s third-quarter Canadian Survey on Business Conditions showed a similar tariff concern across the broader business sector. Nearly one in three businesses, or 32.2%, expected tariffs imposed by the United States on imports from Canada to have a negative impact over the next 12 months. Manufacturing, transportation and warehousing, and wholesale trade were the most likely sectors to report that expectation.
Statistics Canada also found that 27.4% of businesses had passed cost increases due to tariffs onto customers in the 12 months before the survey. Looking ahead, 30.4% said they were very or somewhat likely to pass tariff-related cost increases onto customers over the next 12 months.
The Bank of Canada has also flagged the same pressure points. In its September 2 rate announcement, the central bank held its target for the overnight rate at 2.25% and said the conflict in the Middle East was keeping energy prices high. It also noted new U.S. tariffs and Canadian countermeasures following the breakdown of Canada-U.S. trade talks.
Inflation spillover is still the key risk
Statistics Canada reported that the Consumer Price Index rose 3.0% year over year in August, matching July’s pace. Gasoline prices rose 22.8% from a year earlier, while CPI excluding gasoline rose 2.4%.
The Bank of Canada’s September deliberations said there had been little evidence at that point that higher gasoline prices were passing broadly into other goods and services. However, the central bank also said the longer energy prices stayed high, the more likely they would be passed through.
CFIB’s September price-planning data does not prove a broad inflation pass-through on its own. It does, however, add another signal to watch: more small firms are preparing for larger price increases at the same time customers are showing signs of demand weakness.
The hiring signal turned cautious
CFIB said full-time staffing plans remained weak in September. A larger share of employers planned to lay off staff, at 16%, than planned to hire, at 13%.
That does not mean small firms have stopped worrying about labour. CFIB reported that a shortage of skilled labour remained a growth constraint for 41% of small businesses, while wage costs remained one of the top cost pressures.
Firms still need skills, but weak demand and higher operating costs are making hiring plans harder to justify.
What the September reading says about the small-business economy
For small firms and the companies that sell to them, the September findings point to a more cautious operating environment heading into the final quarter of 2026. Spending decisions are likely to face more scrutiny, especially on purchases that do not protect revenue, reduce costs or address immediate operational pressure.
The data also gives policymakers a more complicated picture. Lower confidence and soft demand would normally argue for caution about growth. Larger price plans, higher fuel costs and tariff-related cost pass-through create the opposite concern: inflation pressure may persist even while business sentiment weakens.
Methodology and limits
CFIB’s September Business Barometer results are based on a controlled-access web survey of a stratified random sample of CFIB members. The organization said it collected 581 responses from verified business owners from September 10 to 16. It reported a margin of error of plus or minus 4.1 percentage points, 19 times out of 20.
Because the index is based on CFIB members, it should be read as a timely measure of small-business sentiment rather than a full census of Canadian businesses. Statistics Canada’s Canadian Survey on Business Conditions covers employer businesses more broadly, but it is quarterly and was conducted from July 2 to August 6, before the CFIB September survey window.
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