Oil Shock Drives Consumer Optimism to New Low in Canada Prairies

  • Indicators for economy and real estate decline nationally
  • Score for Alberta, Saskatchewan and Manitoba lowest since '08

Falling crude prices and a slumping economy have driven consumer confidence in Canada’s energy-rich prairie provinces to a record low.

Nationally, the Bloomberg Nanos Canadian Confidence Index measuring optimism on personal finance, job security, housing and the economy fell to 52.3, from 53 a week earlier. Falling optimism on real estate helped drive the decline, with the share of those who expect home values to drop reaching its highest since 2009.

It’s the prairie provinces of Alberta, Saskatchewan and Manitoba, however, where the outlook is most grim. The index score there fell to 43.3, from 45.1 a week earlier and surpassing the previous record low of 43.9 in December 2008, the telephone polling showed. Tracking began in June 2008 for the index. Nationally, the share of those who say their personal finances are worse off than a year ago rose to 28 percent, the highest since 2013.

“The best indicator of how the drop in the price of a barrel of oil has shaken energy-rich prairie provinces in Canada is the fact the consumer confidence is at an eight year low,” even worse than the 2008-2009 recession, Nanos Research Group Chairman Nik Nanos said.

Sub-2% Growth

The consumer outlook rests, in part, on Prime Minister Justin Trudeau’s upcoming budget and what fiscal jolt he gives the economy, Robert Lawrie of Bloomberg Economics said.

“Private forecasts are calling for sub-2% real GDP growth until the third quarter of 2016, with the success of a fiscal response and the U.S. recovery likely to play a key role in determining household balance sheets,” he said.

National consumer optimism is now at its lowest point since August and below the 12-month average of 55.2. The index declined in every region except Ontario, where it rose slightly to 53.7 from 53.6 a week earlier.

Real estate expectations continue to sour. The share of respondents expecting home prices in their neighborhood to increase in value over the next six months fell to 29.4 percent, from 29.7 a week earlier. The share of those expecting real estate values to decrease in the same period rose to 22.7 percent, the highest level since January 2009.

The pocketbook sub-index score, measuring personal finances and job security, rose to 59.2 from 59 a week earlier. However, the national economic outlook, measuring expectations for real estate and the economy, fell to 45.5 from 47 a week earlier.

The Bloomberg Canada Nanos Confidence Index is compiled using a four-week rolling average of 250 respondents in a telephone poll, for a total sample size of 1,000. It’s considered accurate within 3.1 percentage points, 19 times out of 20.

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