Canada’s Confidence in Economic Outlook Hits 18-Month Low

Canadians’ sense of optimism about the economy slid to the lowest in 18 months amid concern the global recovery may be losing steam, polling data show.

The share of Canadians who think the economy will improve over the next six months dropped to 16.3 percent in the week ended Oct. 17, the lowest since April 2013, according to the Bloomberg Nanos Canadian Confidence Index. Gauges of sentiment about personal finances and real-estate prices also fell, while a measure of job security was little changed. The survey-based index’s broad confidence reading declined to 58.4, the third straight weekly drop, from 59.2.

Consumer confidence in the world’s 11th largest economy is weakening six years after the financial crisis amid the threat of deflation in Europe, a slowdown in China and the spread of the Ebola virus outside west Africa. The International Monetary Fund cut its forecast for world growth on Oct. 7, warning that advanced economies are struggling with high debt levels and lower potential growth.

Investors are shifting into safer assets such as U.S. government bonds, driving the yield on 10-year Treasuries down 40 basis points over the past month to 2.17 percent, while global stocks have declined 7.2 percent. Crude oil, Canada’s biggest export, has lost 11 percent over the same period, while the country’s currency has depreciated 2.8 percent against its U.S. counterpart.

Inflation Expectations

The Bank of Canada will announce its latest interest-rate decision Oct. 22 in Ottawa. Expectations for consumer-price increases in the world’s 11th-largest economy fell last week to the lowest since the 2009 recession amid the decline in crude and other commodities.

Canada’s inflation rate slowed for the second time in three months in September as consumers paid less for gasoline and auto dealers moderated price increases, Statistics Canada reported Oct. 17.

The bear market in crude is threatening to undermine one of the country’s main drivers of growth and slow an ascendancy that has seen the oil-rich province of Alberta come close to matching Quebec in economic size.

Confidence in the Prairies, including Alberta, fell last week to 63.0, the lowest in a month, according to the Nanos report. Sentiment declined in every region except the Atlantic provinces and Quebec.

Below Average

The Nanos gauge has two sub-indexes: the Expectations Index, based on responses about the outlook for real estate and the national economy, and the Pocketbook Index, based on responses about job security and personal finances. The Expectations Index fell to 55.8 from 57.1 last week, while the Pocketbook Index declined to 61.0 from 61.2.

“Positive perceptions of real estate, a key driver of economic sentiment, are now below the 2014 average,” said Nik Nanos, chairman of Nanos Research Group.

The percentage of those who think home prices will increase in the next six months fell to 40.2, the lowest in a month, from 42.6 the prior week. That measure has averaged 40.6 this year. Those who see prices falling accounted for 10.6 percent of respondents, little changed from the previous week.

The proportion of respondents who say they are better off financially in the past year declined to 19.8 percent from 20.6 percent. The gauge has averaged 19.6 percent this year.

Respondents who describe their jobs as at least somewhat secure was little changed at 69.6 percent. The 2014 average is 67.2 percent.

The Nanos index is derived from weekly polling 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.

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