Trudeau Halo Effect Spurs Economic Optimism to 11-Month High

  • Bloomberg Nanos Consumer Confidence Index Hits 11-month high
  • Optimists outnumber pessimists for first time this year

Call it the Trudeau halo effect.

Only days after incoming Prime Minister Justin Trudeau won a surprise majority in Canada’s federal election, consumers have become more hopeful about the country’s economy. For the first time this year, more Canadians are optimistic about the outlook than pessimistic, polling conducted last week by Nanos Research shows.

It’s a reflection of the high expectations among a large swath of the population that Trudeau will deliver on political and economic change, including his pledge to use deficit spending and middle class tax cuts to free the economy from a prolonged period of low growth. Trudeau’s Liberal Party captured 184 of 338 seats in the Oct. 19 election, ousting Stephen Harper’s Conservatives after almost a decade in power.

“We’re seeing a post-election halo effect from Justin Trudeau’s win,” said Nik Nanos, chairman of Nanos Research. “Not only is there political optimism but the research suggests there has been a spillover of optimism related to the economy.”

The share of Canadians who believe the economy will become stronger in the next six months rose to 25.6 percent, the highest reading since April 2014 and compared with 23.1 percent who see it weakening, the least in a year. Optimists outnumber pessimists for the first time since October 2014. Mounting growth expectations helped boost the broad Bloomberg Nanos Consumer Confidence Index to 57.5, the highest in 11 months.

Impressions of job security, real estate and personal finances showed little change over the past week.

GDP Forecasts

Economists predict gross domestic product expanded 0.1 percent in August, according to the median of 19 responses in a Bloomberg survey. Statistics Canada is due to release the data on Oct. 31. GDP grew 0.4 percent and 0.3 percent in June and July, after shrinking for five straight months.

Trudeau’s agenda of infrastructure spendingand tax increases on high earners resonated in a country struggling with depressed commodity prices, falling incomes and an economy that contracted in the first half of this year. Harper, who won accolades for guiding the economy relatively unscathed through the global financial crisis, argued that despite the sluggish economy the country would be worse off with deficits.

The improving sentiment, if it holds up, suggests Trudeau may be having an immediate impact on the economy even before he does anything. Rising consumer confidence can be self-fulfilling, making households more willing to spend, which can boost hiring and output. The flip side? If expectations run too high, modest improvements in growth will still be seen as a disappointment.

“The good news is that people are optimistic,” Nanos said. “The cautionary note is that he has to watch out for expectations being too high.”

Every week, Nanos Research asks Canadians for their views on personal finances, job security, the outlook for the economy and real estate prices. The survey, based on phone interviews with 1,000 people, uses a four-week rolling average of 250 respondents. The results are accurate to within 3.1 percentage points, 19 times out of 20.

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