The CFIB business barometer dropped again in August, giving up around 2 points to reach 56.7, the lowest reading so far this year. This brings the index's losses to 7 points year-to-date, and indicates that a growing number of businesses are expecting their performance to be somewhat weaker in the next months.

Falling confidence was reported in 8 of the 13 sectors, with the largest drop occurring in the natural resources sector (-9.7 points to 35.1) probably due to the plunge in oil prices. Sentiment was also weaker among businesses in the transportation industry (-4.3 points to 54.6) and health and education services (-3.2 points to 60.2). In contrast, optimism found its way back to the construction (+2.1 points to 50.8) and retail (+1.2 points to 54.7) sectors after retreating in the previous month.

Similarly, sentiment also declined in the majority of provinces and the only gains were recorded in Saskatchewan (+7.4 points to 61.9), Nova Scotia (+2.0 points to 65.7) and Ontario (+0.6 point to 61.3). On the other hand, small businesses in Newfoundland and Labrador took the biggest in hit in August as confidence fell by a whopping 6.2 points to 57, followed by those in Manitoba (-4.4 points to 53.8), and Alberta (-3.5 points to 40.4) which continues to display the lowest confidence level across provinces.

Small and medium-sized businesses are becoming increasingly pessimistic about the prospects for the Canadian economy, and despite an expected modest rebound in GDP growth in the second half of the year, confidence retreated for a third consecutive month.

While this partly reflects the weakness in the energy sector, it is also true that confidence has declined in most of the sectors that were considered key to economic recovery. For instance, optimism gradually eroded in the manufacturing sector despite the low Canadian dollar, with real shipments and new orders down 4% and 5%, respectively, since the beginning of the year. The performance of wholesale and transportation industries has also disappointed to date.

"Looking ahead, pressures on the Canadian economy are expected to ease over the remainder of the year. Already, there has been encouraging signs on the trade front with non-energy exports finally picking up in June, which suggests that the strengthening activity in the US is now starting to feed-through to Canadian manufacturing exports. This bodes well for a return to GDP growth in Q3 2015, and should give more reassurance to businesses involved in non-energy sectors", says TD Economics.