Thank you, Mr. Chairman. Thank you for inviting us to present to you today.
CFIB represents 105,000 small and mid-sized business owners. It's a sector that accounts for a major share of GDP, roughly 45%, and certainly a large amount of demand for operational capital financing. It's an area that we have been monitoring for decades, both on the financing and the economic performance sides.
Historically we have conducted studies, say on a three-year rolling basis, on bank financing. On the economy side, we've been running a quarterly barometer since the year 2000. Before that, we ran it on an annual basis, back to 1987. We have a huge amount of context, through good times and bad, in terms of how small businesses are responding to tough economic times.
Yesterday we released our “Business Barometer”. You have it in front of you. There's something there for both the optimists and the pessimists. The pessimists will see that clearly we're in a trough. Our index level is 87.3. Compared to 1988, when we first started doing this kind of measure, clearly it's in the category of negative economic growth. The good news is that it's really no different from what we found in December. The view that the economy has not continued to decelerate over the past three months is perhaps positive news, if you can take it in that context.
You see, in figure 2, that there are still businesses out there that are very successful. It's clearly not as large a number as we have seen in previous years, but it's important to recognize that there are pockets of strength and growth. One should never develop policy, whether it's financial, banking, or sales policy, on the assumption that every business is actually suffering, when in fact many of them are still doing well.
You'll see that GDP does track our numbers very closely. We're in the plans of developing a monthly barometer for the economy, and we're looking at combining that with some financial indicators as well. So we are moving forward on looking at where business financing demand and economic performance are with respect to small firms.
There clearly is a retrenchment going on within our membership. We see it in the numbers. One of the most obvious is at the back of the report, looking at capital expenditure plans. That is a figure that has really never changed since we started asking this form of question. We didn't think it was ever going to change, except that in the past six months a roughly 20% reduction in capital expenditure plans has been noticed. Clearly, there's something going on there.
We have also noticed that pricing and wage increase plans have basically stopped dead. The median price increase and median wage increase is roughly zero or 0.5% at this point. Where we were concerned about inflationary pressures in mid-2007, those pressures are clearly gone from the system.
Turning to the financing side, you'll also see a chart summary. This is from our new monthly foray into looking at the demand side of things. Roughly 50% to 55% of our members say they are underfinanced. Because these numbers are so new, we don't have the numbers to compare with what happens during better economic times. But comparing that with other surveys, we think we'd normally expect roughly 20% under better economic conditions.
We also track what their state is: are they borrowing money right now? There's a bit of good news and bad news there too. Roughly a third of our members don't borrow; they don't have any outstanding loans, which means they are highly conservative in their approaches to business. It means they're also less at risk to these kinds of shocks to the economy.
The other side of the coin is that they are not levered to grow as quickly when the economy does pick up. The small business sector, at least when they're presenting this kind of outlook, shows a high degree of stability, which is a good thing in this context, but the huge growth opportunity is not there.
We also get a sense of where total lending is. Don and a number of others said there is greater outstanding financing out there. We have asked our members why this is the case. Typically, most businesses say the reason they have increased their level of debt—largely through outstanding lines of credit—is that their cashflow has slowed down. They have higher expenditures or lower revenues, and their revolving lines of credit have increased somewhat as a result. That is perhaps the major reason why small business credit has increased, at least in the short term or the past little while.
We have a number of recommendations. They are the same as they've always been. Information on credit and borrowing is absolutely vital in this kind of environment. We need to ensure that we have competitive choice and multiple levels of lending or borrowing opportunities for small firms. And we need to ensure that financial institutions, whether banks or credit unions or others, really have the skills to properly assess the level of risk in the small and mid-sized business markets.
Those are the sorts of things we've have always been recommending in the past number of decades.
Thank you.