Canada’s Consumer Confidence Nears 2014 High on Housing

Canadian consumer confidence is approaching its highest this year as optimism about real-estate values reaches levels last seen in the post-recession boom.

The Bloomberg Nanos Canadian Confidence Index rose to 59.9 in the week ended July 4 from 59.2 previously, nearing the year’s high of 60.1 set April 25. The 44.3 percent of respondents who said home values in their neighborhood would rise in the next six months was the most since the fourth quarter of 2009, when construction surged following a slump.

The housing industry accelerated after a harsh winter disrupted the busy spring sales season. Canada’s biggest lender, Toronto-Dominion Bank, raised its 2014 housing forecast last week after a drop in mortgage rates, while realtors in Toronto and Vancouver reported sales in June that were 15 percent and 29 percent higher than a year ago, respectively.

The total value of purchases in six major Canadian real estate markets rose 24 percent in June compared with the same month a year earlier, according to data compiled by Bloomberg News from regional real estate boards.

Canadian building permits rose 13.8 percent in May, Statistics Canada said today in Ottawa, compared with a median forecast for a gain of 2 percent in a Bloomberg News survey with nine responses.

“Consumer confidence in Canada remains near a high for 2014 largely driven by perceptions of real estate, which registered positive scores above the 2014 average and the six-year average,” said Nik Nanos, chairman of Ottawa-based polling firm Nanos Research Group.

Debt Accumulation

Bank of Canada Governor Stephen Poloz affirmed last month his view that the housing market is headed for a soft landing, while cautioning that “stretched” consumer finances remain a major economic risk. Finance Minister Joe Oliver said in a June 23 interview he is tracking the rise in home prices as the market moderates.

“The sustained steady pace of debt accumulation should afford some comfort to policy makers’ concerns,” Royal Bank of Canada economist Laura Cooper wrote in a July 4 report, noting that year-over-year household borrowing growth was “steady” for a fourth month at 4.2 percent in June. “The vulnerability posed by indebted households is unlikely to intensify.”

The survey-based Nanos index has two sub-indexes. The Pocketbook Index, based on responses to questions about personal finances and job security, climbed to 60.0 from 59.7 the prior week.

The Expectations Index, based on responses about the national economy and real estate, rose 1 point to 59.7, the biggest gain in 11 weeks. The survey is based on phone interviews with 1,000 people, using a four-week rolling average of 250 respondents. The results are accurate to within 3.1 percentage points, 19 times out of 20.

Personal Finances

Canadian stocks rose for the sixth time in seven days July 4 as industrial and financial companies pushed the benchmark Standard & Poor’s/TSX Composite Index to a record, supporting household wealth.

The Nanos-Bloomberg survey showed the share of Canadians who said their personal finances had worsened from six months earlier declined for a third week, to 23.7 percent from 25.3 percent. Optimism about personal finances gained for a second week to 17.8 percent.

Consumers are boosting other big-ticket purchases. Automobile sales rose 2.2 percent in June from a year ago, keeping sales for 2014 on pace for another record high, according to DesRosiers Automotive Consultants Inc. Other signs of consumer health may come this week with housing-starts data July 9 and Statistics Canada’s monthly jobs report July 11.

“First-time homebuyers who were pushed out of the market due to the past tightening in mortgage insurance regulation may find it easier to jump back in,” Toronto-Dominion Bank economist Diana Petramala wrote in a July 3 forecast, citing record lows in five-year mortgage rates. Home resale prices may rise by 6 percent this year and sales by 3.1 percent, she said.

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