Small business confidence in Canada improved in May, but the gain was coming off a record low in March and a weak reading in April.

Based on 719 responses received from May 6 to 12, the CFIB’s long-term Business Barometer® index came in at 40.0 in May versus 25.5 in March and 34.7 in April.

Readings below 50 indicate that more businesses expect their performance to weaken over the year ahead than those expecting it to strengthen. The index has been below 50 since February.

It’s been essentially the same pattern in Alberta, with the long-term outlook falling to 25.2 in March and rising to a better, but still low, level of 41.8 in May.

Quebec had the highest index reading in May at 45.3 while Manitoba had the lowest at 31.5.

The CFIB notes that while “optimism among all SMEs is extremely low…firms trading internationally register lower levels than firms doing business only in Canada.”

Insufficient demand topped the list of barriers to business and production growth with 59% of respondents reporting it as the main limitation and reflects the tepid level of economic growth in the country.

Interestingly, a shortage of skilled labour was the second most-cited barrier to growth at 40%.

With tariffs and uncertainty regarding them hanging over the economy, business confidence is likely to remain subdued with positive news from the trade front improving the outlook and vice versa.

In the meantime, the economic stress evident in these results help make the case for additional interest rate cuts by the Bank of Canada. The Bank may skip making a cut in June (the next interest rate announcement is scheduled for June 4), but we continue to think up to three 25-basis point cuts are coming before the end of the year.

*The long-term optimism index is based on how businesses expect to be performing in 12 months while the short-term optimism index is based on how businesses expect to be performing in 3 months. Measured on a scale between 0 and 100, an index above 50 means owners expecting their business’s performance to be stronger outnumber those expecting weaker performance. An index level near 65 normally indicates that the economy is growing at its potential.

Answer to the previous trivia question: None of the four teams left in the NHL playoffs (Edmonton, Dallas, Carolina and Florida) finished first in their division this season.

Today’s trivia question: How many synapses are there in the human brain?