Growth worries drag Canada’s consumer sentiment

It’s been a dramatic reversal in sentiment for Canada’s consumers.

The Bloomberg Nanos Canadian Confidence Index — a composite gauge based on survey questions — continued to tumble in March, dropping to the worst monthend reading in more than a year as households grow increasingly concerned about the durability of the economic expansion.

The index ended the month at 56.8, the lowest since January 2017. Consumer sentiment has now declined every month this year, driven lower by worries over growth, with almost one-in-three Canadians anticipating the economy will weaken over the next six months.

Over the past three months, the drop in confidence from near-record highs reflects a deterioration in financial conditions for households. That includes rate hikes by the Bank of Canada, a weakening Canadian dollar, sharp declines in stock prices and renewed worries about the housing market.

Combined with a slowing economy, an inter-provincial dispute over Kinder Morgan Inc.’s Trans Mountain pipeline between Alberta and British Columbia, and risks associated with outlook for the North American Free Trade Agreement, consumer angst is on the rise.

“We’re dealing with a one-two negative punch of trade uncertainty and energy uncertainty,” said Nik Nanos, chairman of Nanos Research Group. “There is too much unfinished business related to NAFTA and Kinder Morgan.” The data also suggest Prime Minister Justin Trudeau failed to generate any boost in sentiment from his budget last month, Nanos said.

The three-month drop in sentiment is one of the largest reversals for the confidence index since weekly tracking by Nanos began in 2013. The index is down 3.2 per cent from year-ago levels.

Consumer confidence can be a good barometer of an economy’s overall health. If sustained, the current deterioration in sentiment is consistent with a slowdown in growth of well below two per cent on an annualized basis.

The Bloomberg Nanos Canadian Confidence Index is based on a four-week rolling average of 1,000 phone respondents, who are asked questions about whether they are positive or negative about their personal finances, job security, the outlook for the economy and real estate prices. The poll has a margin of error of 3.1 per centage points.