Housing, oil lift economic hopes for 2017

• Canadian consumer optimism ended 2016 with a small weekly increase, finishing above where it started the year on rising expectations for the country’s growth prospects.

The sluggish economy, hampered by disappointing exports, was a focal point for policy-makers in Prime Minister Justin Trudeau’s first full year in power. Trudeau expanded transfer payments and cut middle- income taxes, while Bank of Canada Governor Stephen Poloz held interest rates steady amid divergence with the U. S. Federal Reserve.

Weekly telephone polling for the Bloomberg Nanos Canadian Confidence Index reveals a recovery of economic expectations in the Prairies, the heart of the country’s energy sector, and a housing outlook that remains buoyant even after governments imposed regulatory measures to cool growth in the hottest markets, Vancouver and Toronto.

Crude rose almost 50 per cent over the year while the S& P/ TSX Composite index returned 18 per cent, each of them reaching their 2016 high last week. It spells optimism, amid some warning signs.

“There were reasons for the various segments of consumers to become more optimistic,” Bloomberg economist Robert Lawrie said. “There is the prospect of a transition to an innovation- based economy. Still to be considered, however, is the persistent slack in the labour market and formulation of policies for those that might be left behind during that transition.”

The index closed the year at 56.8, up from 56.7 a week earlier and its fourth- consecutive increase. That left it up from 53.8 a year earlier, with almost all the change driven by a sub- index measuring housing prices and expectations for the economy. The other sub-index, gauging personal finance and job security, was little changed on the year.

Canada saw the gap narrow between a larger group expecting the country’s economy to shrink, and a smaller group who think it will improve. The former outnumbered the latter by four percentage points at the end of 2016, compared to 17.5 percentage points at the start of the year.

The share of those expecting Canada’s economy to strengthen over the next six months finished the year at 24.7 per cent, up from 20.5 per cent. The share of those expecting contraction finished at 28.7 per cent, down from 38 at the start of the year.

Four of the five regions saw consumer confidence rise in 2016, with the exception being British Columbia, where sentiment fell to 57.8 from 59.9 a year earlier. The biggest increases were seen in the energy- producing Prairie provinces, where the index score rose 5.9 points over the year, though remains the lowest of the regions at 50.9.

The weekly Bloomberg Nanos Canadian Confidence Index is based on a four- week rolling average of 1,000 respondents and is considered accurate within 3.1 percentage points, 19 times out of 20. The latest round of polling ended Dec. 30.

TRANSITION TO AN INNOVATIONBASED ECONOMY.