Canadian Consumer Confidence Rises on Real-Estate Outlook

Canadian consumer confidence rose for the first time in a month as optimism about real-estate prices surged to the highest in almost five years.

The Bloomberg Nanos Canadian Confidence Index climbed to 59.2 for the week ended June 27, from 58.5 in the prior period. The percentage of respondents who believe home values in their neighborhood will increase in the next six months rose to 44.1, the highest since the fourth quarter of 2009.

Optimism about personal finances and the economy also increased, while job-security sentiment dimmed, according to the survey-based index.

“Looking at the key drivers of consumer sentiment over the past six years, it is clear that positive views of real estate is a key factor in Canadian consumer confidence,” said Nik Nanos, chairman of Ottawa-based polling firm Nanos Research Group. Sentiment about real estate is “noticeably” above its six-year average, while personal-finance views are “marginally” below the average for the period, he said.

Canada’s housing market has been surging even as the world’s 11th largest economy struggles to shift into high gear. Canadian realtors recorded their biggest sales gain in almost four years last month, as the industry rebounded from the impact of a difficult winter, the Canadian Real Estate Association said June 16.

Housing starts rose to their strongest level in seven months in May, following a slump in construction in the first three months of the year, Canada Mortgage & Housing Corp. reported June 9.

Rapid Homebuilding

Bank of Canada Governor Stephen Poloz said June 12 that the biggest domestic risk to the country’s financial system remains households with stretched consumer finances after a period of rapid homebuilding. Poloz also predicted a soft landing in the housing market and progress in Europe’s effort to ease its debt crisis.

Canada’s economic growth slowed in the first quarter as the harsh winter slowed housing construction, business spending and exports, and expanded less than economists forecast in April. Poloz said June 4 it remained appropriate for the central bank to keep its benchmark interest rate at 1 percent, in view of the economy’s “modest” pace of growth.

The survey-based Nanos index has two sub-indexes. The Expectations Index, based on responses about the national economy and real estate, rose to 58.7 last week from 58.2.

The share of respondents who think the Canadian economy will improve over the next six months rose to 21.8 percent from 21.1 percent the week before.

Personal Finances

The Pocketbook Index, based on responses to questions about personal finances and job security, climbed to 59.7 from 58.9.

Those who say their finances have improved over the past year rose to 17.6 percent from 17.0 percent, according to the Nanos report.

The proportion who say they feel at least somewhat secure about their jobs dropped to 68.8 percent, the lowest since May 30, from 69.2 percent.

“A modest pickup in overall economic activity appears to have bolstered consumer sentiment,” said Joseph Brusuelas, senior economist at Bloomberg LP, “However, Canadians remain concerned about their own personal financial condition, which is reflective of the household imbalances that remain a pressing policy challenge.”

Canada’s gross domestic product grew less than economists forecast in April as goods production fell while service industries such as wholesaling expanded, Statistics Canada said today in Ottawa. Output rose 0.1 percent to an annualized C$1.62 trillion ($1.51 trillion), the same pace as in March. The median forecast in a Bloomberg economist survey was for the world’s 11th largest economy to expand 0.2 percent.

The Nanos data are 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.

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