Rising Borrowing Costs Weaken Canadian Consumer ConfidenceBy
Nanos index falls to lowest since July as economy cools
Survey respondents say personal finances are in worse shape
Canadian consumer confidence fell to the lowest in more than two months as perceptions about real estate and personal finances worsen.
The Bloomberg Nanos Canadian Confidence Index -- a weekly survey based on questions about personal finances, job security, the economic outlook and real estate prices -- fell to 58.3 at the end of September, the lowest score since mid July.
The steady decline in sentiment over the past few weeks partly reflects a normalization from historically high levels as Canada’s economy, which had been running at the hottest pace in decades, begins to cool. It may also reflect the impact of higher interest rates on personal finances, after the Bank of Canada raised borrowing costs twice since July.
“Most analysts are calling for the Canadian economic recovery to continue but at a slower pace during the remaining months of the year,” Bloomberg economist Robert Lawrie said in a statement.
Sentiment surged in July and the first half of August on the back of a red-hot labor market and the Group of Seven’s fastest-growing economy. The index reached the highest since 2009 in the week ended Aug. 11, fueled by a stronger Canadian dollar, which tends to boost confidence. Even with the recent slip, the index is above levels seen in 2015 and 2016, a period marred by an oil price collapse.
The loss of confidence is being led by a deterioration in personal finances from historically elevated levels, with 24.6 percent of respondents sayings theirs have worsened over the past year. That’s up from as low as 20.4 percent in early August. Those who say their finances have improved was 16.1 percent last week, down from as high as 21.3 percent.
Optimism about housing has taken a beating on the back of slumping prices in Toronto. Some 37 percent of respondents expect real estate prices to increase in the next six months, down from as high as 50.1 percent in May. Another 14.5 percent expect price declines, compared with as low as 8.7 percent in May.
On a regional basis, sentiment has slumped in Ontario and British Columbia, while rising in Quebec to a record. The province is now the most confident in the country.
The Bloomberg Nanos Canadian Confidence Index is based on a four-week rolling average of 1,000 telephone respondents. The latest round of polling ended Sept. 29. The results are considered accurate within 3.1 percentage points, 19 times out of 20.