Confidence slides in September
OTTAWA – After gaining ground in each of the last two months, the Conference Board of Canada’s Index of Consumer Confidence slid 9.2 points in September. The private think tank said the decline was felt all over the country but noted the level remains well above where in began the year which was attributed to good economic growth. Increasing interest rates brought down the outlook on the major purchases question.
The index was set at 112.4 in September. It was set at 100 in 2014.
In his report, board economist Cory Renner noted sentiment for all components except current finances took a step back this month. He wasn’t surprised by the respondents’ perception about current finances.
“Canada’s labour market continues to be strong, and monthly wage growth was good in August, leading more people to believe their finances are better now than six months ago,” he said, adding, ‘However, the share of people who believe their finances are worse than six months ago has also increased. The surprise interest rate hike in September has likely led to more pessimism about future finances and the outlook for major purchases because higher interest charges will hurt household finances.”
The index’s driving factors are mixed. For example, employment has been strong for most of the year and real wages grew well above inflation in August leading to gains for consumers. “Despite the bump in income, Canadians are also seeing rising credit burdens associated with their debt, taking a bite out of household budgets and putting downward pressure on expectations about the future,” Renner said.
The index in Ontario declined in September after rising for two consecutive months; however, it is still higher than at the beginning of the year. Ontarians’ perceptions of their current finances were significantly more positive than the national index and were higher than in any other region of the country.
The Quebec index also fell in September. “Quebecers are still the most optimistic about major purchases by a wide margin – not surprising given that Quebecers are also more optimistic about their future finances than any other province,” Renner observed. However, the province’s weak labour market is impacting confidence in other areas.
British Columbia saw the largest monthly decline since April 2010 in September. People there become much more pessimistic about their future finances, and fell below the level seen in every other region. “While fallout from the wildfires likely plays a role, higher interest rates are also likely hurting British Columbian’s especially hard, given the large mortgages in the province. As a result of these larger debt loads, people in Vancouver are more pessimistic about their future finances than those in the rest of the province,” Renner said.
After rising in August, Alberta’s index dipped slightly last month although the provincial index continues to be much higher than last year. The conference board continues to expect Alberta’s economy to be strong in 2017. Albertans agree as 21.2% of them are expecting the employment outlook to improve this year – the highest among any province.
“Further, expectations that the employment landscape will improve in the future are supporting optimism for major purchases,” Renner said.
The Saskatchewan–Manitoba index declined for second straight month and is one of two regions that has seen its index decline compared with the start of the year. There are two stories, however. While job growth has been good in Manitoba, employment in Saskatchewan has been among the weakest of any province so far this year.
People from Saskatchewan and Manitoba also feel pessimistic about the future, as expectations about future employment is the lowest of any region and expectations about future finances are below the national average.
Volatility in Atlantic Canada’s index continued in September. After rising in August, it declined by almost the same amount last month. “This is the seventh straight month of double digit movements in the province, and thus monthly changes should be considered with caution,” Renner said, while noting the trend has been positive and the average for the first nine months of the year is up compared to last year.
“However, the region has shed jobs this year through August, and the weak employment has been weighing on views of current finances,” he said. “This has been supporting weakness in future expectations, as Atlantic Canadians are more pessimistic about both their future finances and future employment than the nation as a whole.”
The survey of some 3,000 Canadian adults was conducted online between September 5 and 14, 2017.