Confidence in Canada Economic Prospects at Two-Year Low, Nanos Poll Shows

Canadians’ optimism in the country’s economic prospects fell to its lowest in two years as the European debt crisis and concerns about the U.S. recovery dent consumer confidence, according to a poll by Nanos Research.

The proportion of Canadians who predict a stronger economy in the next six months fell to 16 percent from 29 percent in June, according to Nanos’s quarterly economic survey. The share of Canadians who see a weaker economy rose to 38.9 percent from 23.6 percent. The Nanos Expectations Index, which also includes perceptions related to home prices, fell to 104.1 in the third quarter, the lowest since 2009.

The data suggest months of gridlock and brinkmanship between President Barack Obama and Congressional Republicans has hurt confidence, and European leaders’ inability to resolve that continent’s debt crisis may lead to lower spending in Canada, said Nik Nanos, president of the Ottawa-based agency.

“One cannot underestimate the psychological impact of continuing negative news in terms of political gridlock in the U.S. and economic uncertainty in Europe,” Nanos said. “These two forces have created a chill effect among consumers in Canada and have contributed to a further erosion of Canadian consumer confidence.”

Nanos’s findings support a Bank of Canada survey of executives released yesterday that found the least optimism about future sales growth since the beginning of 2009, with signs of weak global demand leading companies to curb hiring and investment plans.

Global Recession Risk

In recent weeks, Prime Minister Stephen Harper and Finance Minister Jim Flaherty have both raised the possibility that the global economy risks falling into recession if European leaders fail to solve their debt crisis. Flaherty, in a speech yesterday in Dublin, said time is running out for Europe before the crisis spreads.

“This is the world’s most immediate and pressing problem,” Flaherty said.

In an interview with CBC television recorded Oct. 13, Bank of Canada Governor Mark Carney said the global economy will take “years to fix.”

While consumer optimism is waning, the Nanos poll found the state of household finances in Canada has been largely unchanged. The share of Canadians who say their personal finances have improved over the past year rose to 21.4 percent from 17.9 percent in June according to the poll, while 72.4 percent of Canadians said their jobs are secure, little changed from the previous survey in June.

The Nanos Pocketbook Index, based on questions related to personal finances and job security, rose to 105.9 in the third quarter, from 104.9 three months earlier.

No Personal Impact

“At this point, although confidence is declining, Canadians have not registered an impact on their personal financial wellbeing,” Nanos said.

The Nanos Economic Mood Index, a composite of the pocketbook index and expectations index, fell to 105.1 in the third quarter, from 113.

The Nanos poll of 1,209 Canadians was taken between September 25 and Oct. 2, and has a margin of error of 2.8 percentage points.

To contact the reporter on this story: Theophilos Argitis in Ottawa at targitis@bloomberg.net.

To contact the editor responsible for this story: Christopher Wellisz at cwellisz@bloomberg.net; David Scanlan at dscanlan@bloomberg.net.

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