Canadian consumer confidence weakened in February to its lowest since 2009, according to a Nanos Research poll, amid concerns about the impact of government cuts in spending as a weak job market curbs incomes.
The Nanos Economic Mood Index fell to 104.6 according to the survey, down from 107.4 in the last survey in December, as readings on personal finances and job security worsened. That was partly offset by growing expectations the economy will improve.
Canada’s unemployment rate rose to a nine-month high in January as the trend of sluggish job creation that began in the second half of last year continued, curbing income gains for households as they face record debt levels. Confidence has waned, particularly among older Canadians concerned about job security and government cuts, said Nik Nanos, president of the Ottawa-based polling company.
“Demographics may become the new dividing line in terms of consumer confidence with Canadians over 50 years of age feeling worse off and pessimistic about the future,” Nanos said in an interview.
The Nanos Pocketbook Index, based on questions related to personal finances and job security, fell to 94.6 in February from 102.8. The Expectations Index rose to 116.7 from 113. The Economic Mood index is a composite of the Pocketbook and Expectations indexes. Since 2008, the Nanos Economic Mood Index has been calculated quarterly. Nanos said he will be releasing it on a monthly basis beginning this month.
Record Consumer Debts
The difference between those who say their personal finances improved over the past year and those who have say they worsened fell to negative 15.5 percentage points, down from negative 10.8 in December, amid higher unemployment and rising consumer debt levels. Consumer borrowing was a record 153 percent of disposable income in the third quarter, Statistics Canada said Dec. 13.
The negative balance of opinion for Canadians aged 50 and over is more than three times that of Canadians in their forties, according to the survey.
Concerns about pensions may help explain the age gap in confidence, Nanos said. Prime Minister Stephen Harper, in a Jan. 26 speech in Davos, Switzerland, said the government will take steps to ensure the country’s fiscal position will be sustainable “over the next generation.” Harper has also said any changes wouldn’t affect individuals already receiving pensions or approaching retirement.
“Speculation related to changes to pensions may be tempering consumer confidence, especially among Canadians 50 years of age and older,” Nanos said.
Job Security Falls
The balance of opinion on job security fell to 45.5 percentage points, the lowest since 2008, from 54.6 in December. Canada’s unemployment rate rose to 7.6 percent in January, Statistics Canada said Feb. 3, with employers cutting a net 34,200 jobs over the past four months.
Pocketbook worries were tempered by growing optimism over the economic outlook and real estate prices, Nanos said. The difference between Canadians who say the economy will improve over the next six months and those who say it will deteriorate narrowed to negative 8.4 percentage points in February, from negative 12.4 percentage points in December.
The balance of opinion on expectations for real estate price gains rose to 27.1 percentage points, the highest since the second quarter of 2010.
The Nanos online poll of 1,001 Canadians was taken between Feb. 7 and Feb. 11.