Photographer: Marlene Awaad/Bloomberg


Consumer Confidence Takes a Hit With Canada’s Economy Gearing Down

  • Sentiment cools for 2nd straight month, dipping below average
  • No signs of a post-budget boost in consumer confidence

Canada’s suddenly jittery economy is facing another headwind: wavering consumer confidence.

Economic sentiment cooled for a second straight month in February, according to polling by Nanos Research Group for Bloomberg News, with Canadians increasingly concerned about the sustainability of the nation’s expansion.

It’s been a dramatic reversal in consumer confidence. Over the past two months, sentiment has dropped from near record highs to below average levels, reflecting an overall deterioration in economic conditions for households. These include three rate hikes by the Bank of Canada since July, a weakening Canadian dollar, sharp declines in stock prices, renewed worries about the housing market and a slowing economy.

“Household equity holdings have lost 4 percent of their value; new regulations and higher interest rates are likely to have a moderating effect on home values; and the economy appears to be taking a breather after last year’s rapid growth,” said Bloomberg economist Robert Lawrie.

The Bloomberg Nanos Canadian Confidence Index -- a composite gauge based on survey questions -- was at 57.7 for the week ending March 2. That’s down from 59 at the end of January and 62.2 at the end of 2017, marking its biggest two-month decline in two years. The index has also fallen below year-ago levels for the first time in more than 12 months.

Consumer confidence levels can be a good barometer of an economy’s health. If sustained, the deterioration in sentiment would be consistent with a slowdown in growth that is widely anticipated -- though there are concerns Canada’s economy may be headed toward a faster-than-expected deceleration.

Growth is forecast at 2 percent this year on slowing consumption, after a 3 percent gain in 2017 that led the Group of Seven.

Confidence is falling even as the job market is the strongest in four decades, with the next labor force report due Friday forecast to show the unemployment rate holding at 5.9 percent. The data also suggest there was no immediate boost of confidence following Prime Minister Justin Trudeau’s budget last week.

“The percentage of Canadians who think the Canadian economy will get stronger in the next six months has dropped over six points in the past four weeks, with a noticeable drop during the Government of Canada’s budget week,” said Nik Nanos, chairman of Nanos Research Group.

Highlights of the Consumer Confidence Report

  • The decline in February was largely driven by expectations, rather than pocketbook issues
  • For example, Canadians are becoming more negative on the economy’s outlook, with pessimists outnumbering optimists. About 22 percent of Canadians see the economy strengthening, versus about 28 percent who see it worsening. That’s the biggest negative month-end gap since last May
  • A month ago, optimists outnumbered pessimists 28 percent to 23 percent
  • Expectations for real estate prices also showed a small deterioration in February
  • Pocketbook issues like job security and personal finances were largely stable or better in February, after posting large declines in January
  • Regionally, Alberta and British Columbia recorded sharp declines in sentiment in February, possibly reflecting a pipeline dispute between the two provinces.

The Bloomberg Nanos Canadian Confidence Index is based on a four-week rolling average of 1,000 telephone respondents, who are asked questions about their personal finances, job security, the outlook for the economy and real estate prices. The survey has a margin of error of 3.1 percentage points.

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