Canadian sentiment had its biggest drop in a year after the Brexit decision, with confidence in the domestic economy, housing prices and job security all falling.
The Bloomberg Nanos Canadian Confidence Index, in the first full week of polling after the U.K. voted to leave the European Union, fell to 56.7 from 58.3 a week earlier. It was the largest one-week decline since July 2015. The drop was felt in each region surveyed and in each sub-index, indicating widespread domestic impact of global market turmoil.
“This is the first significant downturn in Canadian consumer confidence in five months, and external events were the likely catalyst,” Bloomberg Economist Robert Lawrie said. “The globalization of financial markets is a fait accompli, and whether or not this marks the start of a long-term correction in Canadian consumer sentiment will depend in part on the spillover effects on household balance sheets and the response from the respective monetary and fiscal authorities.”
The S&P/TSX Composite Index fell 3.1 percent in the two trading days that followed the June 23 Brexit vote, before rebounding last week. It climbed 1.3 percent in early trading Monday in Toronto to its highest level since June 8, two weeks before the Brexit vote.
The confidence index is based on a rolling average of polls and therefore is only partially reflective on post-Brexit sentiment. The pocketbook sub-index, measuring personal finance and job security, fell to 57.8 from 59.1. The expectations sub-index, measuring sentiment for the economy and housing prices, fell to 55.5 from 57.6.
Consumer confidence fell in every region and nearly every age group and income range -- only those aged 18 to 29, or with an income below C$15,000 ($11,600), were more optimistic than the week earlier.
Those expecting the Canadian economy to strengthen in the next six months fell to 23.7 percent of respondents, from 26 percent, reaching the lowest since March. Those expecting the economy to weaken outnumbered those expecting it to strengthen by 3.6 percentage points, the largest gap since April.
On real estate, the share of those expecting housing prices to decline in their neighborhood in the next six months rose to 15.3 percent from 14.2 percent a week earlier.
The Bloomberg Nanos Canadian Confidence Index is based on a four-week rolling average of 1,000 respondents and in considered accurate within 3.1 percentage points, 19 times out of 20, with larger margins of error in regional and demographic breakdowns. The latest round of polling concluded June 30.