Canadian consumer confidence high for 2018 thanks to booming jobs market
The big-spending Canadian consumers who showed no signs of letting up in 2017, are entering the new year in an exuberant mood.
Consumer confidence neared record levels as the year came to a close last week, with sentiment buoyed by a booming jobs market, a strong housing market and an end-of-year jump in commodity prices.
Telephone polling suggests broad-based gains in everything from job security to the outlook for housing, and across regions.
The Bloomberg Nanos Canadian Confidence Index – a weekly composite gauge based on survey questions – was at 62.2 for the week ended December 29.
That is the highest reading since the last week of 2009, when the economy was just beginning to emerge from recession.
It certainly bodes well for the already strong economic expansion that surprised economists and policymakers in 2017
The big question in the new year is to what extent the economy decelerates from last year’s elevated levels, particularly with the Bank of Canada expecting to raise interest rates further.
Much will depend on household spending, which has carried the country’s economy for years and accounted for just about all of its growth since the collapse of oil prices three years ago.
However, there are plenty of reason for households to be optimistic going into 2018.
Canada’s jobless rate in November fell to 5.9 per cent. That is the first time it’s fallen below 6 per cent since 2008 and is one of the lowest jobless readings in the past four decades. Employers have added nearly 400,000 jobs over the past 12 months.
Average hourly earnings – which have been stagnant for much of the past year – are showing signs of accelerating.
Canada’s housing market has shown resiliency despite a number of new headwinds, including higher borrowing costs.
Add to that rising stock prices and a stronger Canadian dollar that’s boosted purchasing power.
And oil prices are finally on the rise again, which is giving a boost to Canada’s energy producing regions. Sentiment in the prairie provinces has increased to the highest levels since 2014.
The confidence index has been on a slow upward trend since bottoming out in 2015, but has seen particularly sharp gains since October amid the recent jobs boom, improving outlook for oil prices and robust housing markets. From a year earlier, the index is up nearly 10 per cent.
Despite higher borrowing costs and efforts by all levels of government to curb demand, Canadians are still extremely optimistic about the outlook for housing prices.
Just over 43 per cent predict real estate will continue appreciating. While down from the record levels of earlier this year, that’s still well above the 37 per cent recorded at the end of 2016.
The booming jobs market was one the biggest economic stories in Canada last year, and the surveys suggest this is starting to bolster job security considerably.
The share of Canadians who say their job is secure reached a two-and-a-half-year high of 54 per cent last week.
The Bloomberg Nanos Canadian Confidence Index is based on a four-week rolling average of 1,000 telephone respondents, who are asked questions about their personal finances, job security, the outlook for the economy and real estate prices.