All the economic indicators have been pointing up, but Canadians have yet to fully buy into the economic recovery, a new survey suggests.
The Conference Board of Canada‘s consumer confidence index fell a surprising and statistically significant 7.8 points this month to 84.8, the lowest it’s been since December.
The gloomy finding comes as a U.S. survey found consumer confidence there rising, although the mood of Americans remained far more pessimistic in comparison with Canadians.
“It’s a little bit disconcerting when we’ve had a lot of positive news of late,” said Todd Crawford, an economist with the Ottawa-based think-tank.
While employment has been trending up, Canadians may be disappointed with the pace of job creation, Crawford said, adding that they may also have been influenced by expectations that the Bank of Canada plans to start raising interest rates.
Canada’s chartered banks have already stepped ahead of the curve with a string of rate hikes that have added about 1% to the fixed rate on longer-term mortgages. The Royal Bank and TD Bank edged rates up slightly again Monday by 0.15%.
“Consumer confidence is far higher than it was a year ago, but at the same time there could be a little frustration setting in with the pace of the recovery,” said Crawford.
TD Bank economist David Onyett-Jeffries said the Canadian result would be more worrying if it were part of a trend, noting that Canadians are still far more optimistic than their American counterparts.
A recent Statistics Canada analysis showed that the U.S. economy suffered far greater losses in the recession than did the Canadian economy, especially in the area of employment. The U.S. shed about 8.5 million jobs, whereas job losses in Canada–taking into account population differences–were about half that level at slightly more than 400,000.
The levels between the two countries are like night and day, Onyett-Jeffries pointed out.
“In the U.S., [consumer confidence] is only slowly starting to regain lost ground. In Canada, we’re approaching pre-recession levels,” he said.
As well, he noted that the Conference Board index has been see-sawing the past four months and has not established a downward trajectory over an extended period of time.
Economists are of mixed minds about how much importance to attach to confidence surveys, although the Conference Board believes they are mostly accurate indicators of future purchasing intentions.
The April survey found soft sentiment across the spectrum, with more Canadians saying they were financially worse off than they were six months ago. And more respondents also said they expected to be worse off six months from now and that job prospects would be worse in six months.
The only non-negative response was on the question of buying intentions. About 47% said they believed now was a good time for a major purchase, such as a car or home, about the same as in March.
Regionally, sentiment in Quebec and the four western provinces tended to be more negative than in Ontario and the Atlantic provinces.
