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Canada Consumer Sentiment Falls for Second Week on U.S.

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Oct. 15 (Bloomberg) -- Canadian consumer sentiment fell for a second week as budget disputes in the U.S. continue to weigh on views of the economy, according to the Bloomberg Nanos Canadian Confidence Index.

The index, a weekly measurement of the economic mood of Canadians, fell to 58.5 in the period ended Oct. 11, from 59.0 the previous week. It marks the lowest score since the week ended Sept. 6 for the index, which tracks consumers’ perceptions of the strength of the economy, job security, real estate and their financial situation.

A measure of attitudes about the economy’s prospects turned negative for the first time since August amid concern that political gridlock in the U.S. would shake markets and risk provoking a worldwide recession. Finance chiefs from the Group of 20 countries meeting in Washington last week urged U.S. lawmakers to take “urgent action” to end the deadlock.

“A failure to resolve the situation in the U.S. would have global consequences,” Canadian Finance Minister Jim Flaherty told reporters Oct. 11 in Washington.

The share of Canadians who believe the economy will become stronger over the next year fell to 19.9 percent last week from 21.0 percent the previous week and 22.4 percent two weeks earlier. Those who expect it to weaken has increased to 20.2 percent from 16.5 percent over that time.

“We will need to continue to monitor Canadian consumer confidence in light of the budget gridlock in the United States,” said Nik Nanos, chairman of Nanos Research Group, an Ottawa-based research company.

Falling Expectations

The Bloomberg Nanos Canadian Confidence Index has two sub-indexes: the Bloomberg Nanos Canadian Pocketbook Index on personal finances, and the Bloomberg Nanos Expectations Index on future views. The data in the indexes date to 2008 and is based on phone interviews with 1,000 people, using a four-week rolling average of 250 respondents. The results are accurate to within 3.1 percentage points.

The expectations index, based on surveys for the outlook for the economy and real estate prices, fell to 56.2 from 57.3 on waning expectations for economic growth.

The Pocketbook Index, based on survey responses to questions about personal finances and job security, was little changed at 60.8.

“The plateauing of confidence and expectations of the Canadian median household is likely a function in slowing of demand for commodities, falling oil prices and policy risk in the U.S.‘‘ said Joseph Brusuelas, senior economist at Bloomberg LP in New York.

Disappointing Growth

The fiscal battles in Washington risk slowing global growth at a time when Canada’s economy has struggled to build momentum and has been expanding more slowly than policy makers projected earlier this year. Statistics Canada reported Oct. 8 the nation ran a trade deficit of C$1.31 billion in August, marking the 20th straight monthly gap.

Bank of Canada Governor Stephen Poloz said Oct. 11 in Washington that Canada’s growth has disappointed, the same day the central bank released a report that showed Canadian business investment intentions fell to a four-year low.

‘‘We are behind where we thought we would be let’s say a year ago, or even for that matter 6 months ago,’’ Poloz told reporters in Washington. ‘‘What we need is growth that is significantly above 2 percent to begin reducing the excess capacity that we have in the economy.’’

Bank of Canada Senior Deputy Governor Tiff Macklem said Oct. 1 that Canada needs ‘‘growth of at least 2.5 percent’’ to absorb the slack in the economy. Economists surveyed by Bloomberg News this month don’t expect the expansion to exceed that pace until 2015.

Slowing Growth

Canada has averaged annualized quarterly growth rates of 1.3 percent since the start of 2012, down from about 3 percent in 2010 and 2011, according to Statistics Canada data. Two other indicators that have suggested economic weakness over the past year -- manufacturing sales and inflation -- will be updated by Statistics Canada this week. Factory sales figures for August will be released tomorrow, with economists surveyed by Bloomberg forecasting a 0.2 percent gain.

Canada’s inflation rate, to be released Oct. 18, probably slowed to 1 percent in September, according to economist estimates from a Bloomberg News survey.

Jobs growth has also slowed this year. Statistics Canada reported Oct. 11 the economy created 11,900 jobs in September, bringing average monthly gains to 12,570 this year, about half the 2012 pace.

Still, before the drop in the last two weeks, Canadian consumer sentiment had climbed to a 2-year high, in part because the housing market has remained buoyant. The Canadian Real Estate Association said today home sales in September rose 0.8 percent from August and 18.2 percent from the same month a year earlier. National Bank Financial’s home price index was unchanged from August and climbed 2.7 percent on the year, according to a report released today.

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

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

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