Pessimism About the Economy and Housing Dent Canadian ConfidenceBy
Real-estate sentiment worsens on tighter mortgage rules
Weak reading among low earners suggests income ‘asymmetry’
Canadian consumer confidence fell for a second month as the outlook for the economy and real estate prices soured, telephone polling showed.
The Bloomberg Nanos Canadian Confidence Index declined to 57.6 in the week ended Oct. 27, the final reading of the month, versus 58.3 in September and 59.7 August. The sub-index tied to perceptions about the economy and housing had the lowest month-end reading since January.
The deterioration reflects what’s happening in the economy. The pace of growth in Canada is returning to more normal levels after topping the Group of Seven in the first half. Additionally, the central bank raised interest rates twice since July, eating into the disposable income of some families, and a federal regulator introduced measures this month to tighten access to mortgage financing.
“More households are holding a negative outlook on the economy than a positive one,” said Bloomberg economist Robert Lawrie. “Considering the persistent slack in the labor market and the high level of household debt, the prospect of slower growth might seem more daunting for households with less savings.”
The share of respondents who said local housing prices will decline in the next six months climbed to 15.4 percent last week, up from 14.5 percent a month earlier. Canada’s housing agency pared its sales and price forecasts last week for the next two years, saying five-year mortgage rates could rise by 1.6 percentage points over that period.
Pessimism about the overall economy increased for a third month. The 28.2 percent of respondents who said it would become weaker in the next six months was the highest month-end reading since January.
Household finances received a boost last week from Prime Minister Justin Trudeau’s fiscal update, which offered expanded benefits for families and low-income workers, and the Nanos data suggest poorer workers could use a shot in the arm. The confidence reading for people making between C$15,000 ($12,000) and C$29,999 a year was the lowest since March 2016. Sentiment has held up across other income brackets, said Nanos Research Group Chairman Nik Nanos, meaning “the tracking suggests an income asymmetry in confidence.”
The results show the two main sub-indexes are diverging: the Expectations measure fell to 54.2, while the Pocketbook Index -- tied to job security and personal finances -- rose to 61. The gap between them is the widest on a month-end basis since February 2016.
The Bloomberg Nanos Canadian Confidence Index is based on a four-week rolling average of 1,000 telephone respondents. The results are considered accurate within 3.1 percentage points, 19 times out of 20.
— With assistance by Erik Hertzberg, and Luke Kawa