Canadians Ignore Recession, Lift Confidence Gauge for 3rd Week

  • Bloomberg-Nanos index reaches highest level since mid-July
  • GDP report due Tuesday amid Canada's election campaign

If Canadians are worried about the recession economists keep talking about, they’re not letting on.

The Bloomberg Nanos Canadian Confidence Index, based on telephone polling, climbed to 53.7 in the week ended Aug. 28, from 53.2, the third straight gain and the highest reading since July 17. The percentage of respondents who said the economy will be softer in six months declined to 41.6 percent, from 43.1 percent.

Optimism is rising before a Statistics Canada report Tuesday that economists predict will show a second straight quarter of falling gross domestic product, which some say is the definition of a technical recession. The R-word has been at the center of Prime Minister Stephen Harper’s bid for a fourth term in an Oct. 19 election, with the incumbent saying his program of tax cuts and balancing the budget will help Canada avoid slumps seen in countries such as China and Greece.

“Canada isn’t the cause of the slowdown in the global economy,” Harper said last week in Lancaster, Ontario. “What Canadians want is for us to live within our means.”

Liberal Leader Justin Trudeau has said he would run three years of deficits to grow the economy again with infrastructure projects, and Tom Mulcair of the NDP says balancing the budget and cutting small business taxes are the best path to growth. Recent polls suggest all three parties could win in October.

Statistics Canada will report GDP shrank at a 1 percent annualized pace in the second quarter, according to the median forecast in a Bloomberg survey of 19 economists. The report is due at 8:30 a.m. from Ottawa. Output also contracted at a 0.6 percent pace between January and March as the shock of lower oil prices hobbled exports and business investment.

“There’s nothing in our numbers right now that suggests that Canada is in a
recession,” Louis Vachon, Chief Executive Officer of Montreal-based National Bank of Canada, said in a phone interview Aug. 26. “Yes, economic growth is relatively slow, but it’s not the same thing as to say we’re in a recession.”

The gain in household confidence last week came as global stock markets plunged and Canada’s dollar fell to the lowest since 2004. That led investors to raise bets that Bank of Canada Governor Stephen Poloz will cut rates for a third time at his next meeting Sept. 9. Harper on Aug. 24 took the unusual step of publicizing a call with Poloz to discuss the market rout, and two days later said he has full confidence in the central bank.

The Nanos data show the Expectations measure, based on responses to questions about the outlook for real estate and the national economy, rose to 47.4 from 47. The survey’s Pocketbook gauge, which incorporates views on job security and personal finances, increased to 60 from 59.4.

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