Quebec and Housing Push Canadian Consumer Sentiment to 2016 High

  • Confidence in real-estate market comes amid warnings of bubble
  • Optimism gains in Quebec amid improving job market, finances

Consumer sentiment returned to the highest this year in Canada as Quebec residents felt better off financially and more people bet the country’s housing boom would continue.

The Bloomberg Nanos Canadian Consumer Confidence Index rose to 57.8 in the week ended June 3, from 57.5 previously, according to telephone polling of 1,000 respondents. Quebec’s pocketbook measure -- based on responses to questions about personal finances and job security -- climbed to 62.2, the highest since February 2015.

S&P Global Ratings affirmed Quebec’s A+ rating last week and upgraded the outlook to “positive” from “stable,” on the potential for an improving budget performance. The province’s output will grow faster than the national average this year for the first time since 2009, according to economists surveyed by Bloomberg News, and the jobless rate is down to 7.5 percent, from 7.9 percent in December.

“The average Quebec consumer, for the first time, has seen a bit more money in their pocket,” Louis Vachon, chief executive officer of Montreal-based National Bank of Canada, said in a June 1 telephone interview. The job market, a balanced Quebec budget and federal tax cuts all have helped boost consumer finances, he said.

‘Right Direction’

Finance Minister Carlos Leitao presented a balanced budget in March and aims to cut debt as a percentage of gross domestic product to 45 percent by 2026, from 55 percent. He told reporters on Thursday the fiscal improvement will give him latitude to aid an economy already gaining from a rebound in factory production.

“Manufacturing is rebounding like we expected. Things are going in the right direction,” Leitao said. Canada’s economy has been marked this year by regional divergence, as Quebec and Ontario factories gain from U.S. orders and a weaker dollar, while Alberta oil producers suffer from low commodity prices.

CGI Group Inc. of Montreal said June 1 it had won an eight-year contract with La Banque Postale, a Paris-based postal and banking network.

Quebec’s gross domestic product will grow 1.9 percent this year, according to the Bloomberg survey, which also predicts Canada will expand 1.5 percent and Alberta will shrink 1.1 percent.

The confidence Canadians are showing in the housing market comes at a time when policy makers and banking executives have stepped up warnings about the potential for record consumer debt-loads and housing prices to trigger a correction in Vancouver and Toronto. The 44.8 percent of respondents in Nanos polling who see local house prices rising in the next six months was the highest since July 2014.

“To the extent that consumer sentiment is signaling a housing bubble, the monetary authorities might need to balance the necessity of extremely low interest rates during the economy’s period of adjustment with policies that tighten the availability of household credit and damp the domestic demand for housing,” said Bloomberg economist Robert Lawrie.

Toronto and Vancouver reported record sales in their latest monthly figures. Average prices in Toronto rose 16 percent to C$751,908 ($582,000) in May from a year earlier, according to broker figures.

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