Canadian Consumer Confidence Drops on Employment OutlookGreg Quinn
Canadian consumer sentiment dropped for the first time in a month as a surprise decline in employment in Ontario diminished optimism in the nation’s most-populous province.
The Bloomberg Nanos Canadian Confidence Index fell to 58.7 from 59.2 the prior week. Ontario’s mood index fell almost 1.5 percentage points, leading the national drop after the province lost 39,300 jobs in December.
“A significant portion of the decline in consumer confidence was in the province of Ontario,” said Nik Nanos, chairman of Ottawa-based polling firm Nanos Research Group. “Considering Ontario over the past year showed a noticeable improvement in consumer confidence, this will need to be monitored.”
The poll tallies the first full week of responses after Statistics Canada reported a national decline of 45,900 jobs. The country’s dollar hit four-year lows on speculation domestic spending that has bolstered the world’s 11th largest economy will stall before exports and business investment can take over as growth drivers.
Those signals “are likely to weigh heavily on Canadian consumer sentiment going forward,” with “a consumer that is likely to remain cautious in their spending outlook,” said Joseph Brusuelas, senior economist at Bloomberg LP in New York.
Job creation is a key issue in Ontario with the province’s Liberal government, led by Kathleen Wynne, holding a minority of seats in the legislature and needing support from opposition lawmakers to pass laws and avoid elections. Progressive Conservative leader Tim Hudak released a plan last week that he says would create 1 million jobs over eight years. Fiat SpA Chief Executive Officer Sergio Marchionne is seeking government subsidies to upgrade a Chrysler minivan factory in Windsor.
The two main components of the main confidence index both declined in last week’s poll. The Pocketbook Index based on personal finances and job security fell to 59.6 from 60.3, and the Expectations Index tallied from the outlook for the economy and real-estate prices declined to 57.8 from 58.1.
The real estate market has softened along with job prospects. Home sales fell 1.8 percent in December, the third straight decline, the country’s main realtor group reported Jan. 15. Prices rose 5.2 percent for 2013, a year of concern about the sustainability of housing gains as consumer debt burdens reached record highs.
Bank of Canada Governor Stephen Poloz will give an economic update at a Jan. 22 interest-rate decision followed by a press conference. Economists predict the bank’s policy rate will remain 1 percent where it’s been since September 2010. Poloz dropped language about the future need for higher rates in October and said in December the risks of inflation staying below his 2 percent target have increased.
Consumer prices rose 0.9 percent in November from a year earlier, and a Jan. 24 report may show it accelerated to a 1.3 percent December pace. Statistics Canada will also report retail sales for November on Jan. 23.
The central bank’s policies have been appropriate given the situation, Prime Minister Stephen Harper said in a Jan. 16 interview.
“We have every reason to have confidence that the Bank of Canada has appropriate monetary policies in place,” Harper said. He also said the last jobs report may be “a statistical aberration,” and that Canada’s economy will improve this year.
The Nanos poll showed that 23.8 percent of Canadians predicted the economy will be stronger in the next six months, the highest since Dec. 6 and the fourth straight increase.
The Nanos poll is based on phone interviews with 1,000 people using a four-week rolling average of 250 respondents, and the last round of calls ended Jan. 17. The results are accurate within 3.1 percentage points, 19 times out of 20.