Canada Consumer Sentiment Ends 4-Week Slide on Employment

Canada’s consumer sentiment rebounded from a four-week slump after January job gains bolstered optimism and the nation’s currency pared losses.

The Bloomberg Nanos Canadian Confidence Index rose to 57.1 in the week ending Feb. 14 from a previous reading of 56.0, which was the lowest since May. Sentiment improved in every region except the prairies.

A job-security measure rose to the highest since December after Statistics Canada reported the labor market in January reversed December’s losses. The national unemployment rate fell to 7 percent from 7.2 percent as payrolls expanded by 29,400 positions, the agency said Feb. 7.

“The improvement in hiring likely bolstered Canadian consumer confidence and economic expectations, arresting the recent slide in sentiment,” said Joseph Brusuelas, senior economist at Bloomberg LP in New York.

Consumer sentiment had deteriorated since the start of 2014, tracking losses in the nation’s dollar as foreigners diverted capital to higher-yielding markets. International investors cut holdings of Canadian securities by C$4.28 billion ($3.90 billion) in December, trimming inflows for 2013 to C$42.8 billion, down from C$83.2 billion in 2012 and the least since C$31.9 billion in 2008, Statistics Canada said today.

The loonie, as the currency is sometimes known, has risen 1.6 percent in February versus its U.S. counterpart. It’s still the worst performer this year among Group of 10 countries, down 3.1 percent.

Budget Balance

Finance Minister Jim Flaherty laid out a plan in his Feb. 11 budget to return the nation’s finances to balance next year. That plan may also be helping optimism, according to Nik Nanos, chairman of polling firm Nanos Research Group.

“The Canadian federal budget is a key signaling event for consumers in terms of the government of Canada’s views on the future of the Canadian economy,” said Nanos from Ottawa. “It will take a few more weeks to see if this is a new trend or a one-week blip.”

The share of Canadians who say their jobs are secure or somewhat secure rose to 66.6 percent, the highest since the second week of December, from 64.6 percent in the prior period. The share of survey respondents who say their jobs are not at all secure or somewhat insecure fell to 11.4 percent from 12.4.

Canadian employers increased full-time positions by 50,500 in January, the biggest one-month gain since May, Statistics Canada said. Wages also accelerated, with average hourly wages of permanent employees climbing 2.7 percent from a year earlier, exceeding the prior 2 percent increase.

Home Values

Gauges tracking real estate and personal finances also showed improving sentiment.

The proportion of survey respondents who believe home values in their neighborhood will rise over the next six months rose to 38.4 percent last week from 36.3 percent, while those predicting declines fell to 11.5 percent from 12.0 percent.

While recent data have shown the housing market is softening in terms of sales and construction, values continue to increase. The average price of a home sold in January was 9.5 percent above year-earlier levels, the Canadian Real Estate Association said Feb. 14.

“The old rule of thumb is that prices follow sales with about a six-month delay,” Doug Porter, chief economist in Toronto at Bank of Montreal’s BMO Capital Markets, said in a note to investors.

The share of respondents who say they’re better off financially than they were a year ago rebounded to 18.0 percent, from 17.3 percent. Those who said they’re worse off declined to 24.9 percent, from 27.1 percent.

Economy Sentiment

Perceptions about the economy’s strength remained at their lowest since April last week. The share of survey respondents who say the economy will improve in the next six months fell to 17.3 percent from 18 percent, while the share of those who anticipate a weakening fell to 27.5 percent.

Bloomberg Nanos’s confidence index has two sub-indexes: the Pocketbook Index, based on survey responses to questions about personal finances and job security, and the Expectations Index, based on responses on the outlook for the economy and real-estate prices.

The Pocketbook Index rose last week to 60.0 from 58.5, while the Expectations Index rose to 54.2 percent from 53.5.

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 within 3.1 percentage points.

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