Despite clouds, consumers confident

Most expect little oil-price fallout

It may seem counter-intuitive, but most Canadians still appear comfortable with the state of the economy — as well as their own level of debt — despite the plunge in the country’s major export, energy products, and slumping growth overall.

In fact, consumer confidence is at its highest level in two months and most households — those outside Alberta, at least — are not overly concerned about their personal finances, according to surveys released Monday.

While household debt remains a worry among many Canadians, it is still overshadowed by the allure of cheaper borrowing costs.

“A number of recent developments suggest a possible deterioration of Canada’s economic prospects,” the Chartered Professional Accountants of Canada said Monday. “Those include the decline in international oil prices and (a cut in the) Bank of Canada’s target interest rate,” the CPA added. “However, households outside Alberta did not view these changes as having the potential to affect their financial well-being.”

The CPA’s winter 2015 survey found 49 per cent of consumers believe these recent events “would not have a noticeable impact” on their finances during the next 12 months. As well, 34 per cent of households feel lower oil prices and interest rates “were likely to prompt them to decrease their current pace of savings,” while another 22 per cent said they were inclined to increase their borrowing more than initially planned “as a result of the shift in economic conditions.”

Meanwhile, just 16 per cent of those polled across the country expect any negative impact on their finances from a likely weaker overall economic performance. On the other hand, in Alberta — the province most dependent on energy products to power growth — 34 per cent of households anticipate a negative impact on their bottom line.

Even so, the latest survey results “changed very little” from those in the CPA’s spring 2014 tally.

“It may be a matter of perception,” said Kevin Dancey, CPA president and CEO. “Factors such as lower interest rates, cheaper gas and a strengthening U.S. economy may have some people thinking things are just fine.”

Canada has not fared as well as the U.S. recently, with the unemployment rate running at 6.8 per cent — compared with 5.5 per cent south of the border — and job creation remaining patchy after an initially strong spurt following this country’s 2007-08 recession.

Growth in the economy is also weaker, mainly the victim of the collapse in oil prices.

In January, Bank of Canada governor Stephen Poloz announced a surprise cut in the bank’s trendsetting lending rate to 0.75 per cent — from the long-standing level of one per cent — as “insurance” against the fallout from the drop in crude.

Statistics Canada releases the latest gross domestic product data on Tuesday, with many analysts predicting a 0.1-per-cent contraction in January — possibly leading to first-quarter annualized growth of 1 per cent or less.

“However, no matter what happens with the economy over the coming months, the lingering issue of high debt levels cannot be ignored,” said CPA’s Dancey.

Despite these concerns, another survey Monday showed consumer confidence in Canada increased last week for the fourth straight week, rising to a reading of 55.6 from 55.0 previously.

That is the highest level for the Bloomberg Nanos Canadian Confidence Index since January and the longest back-to-back gain since September.

The index has showed a big turnaround from a 21-month low of 53.6 at the end of February, pushed down by concerns over the tumble in energy prices.