Economic turmoil hammers consumer confidence: Conference Board
CBOC’s consumer index drops for fourth consecutive month, now at lowest level since January.
Conference Board of Canada
OTTAWA: Global economic turmoil and negative reports at home are taking their toll on the faith of ordinary Canadians and Americans in the economy.
The Conference Board’s (CBOC) latest consumer confidence reading for June, released Tuesday shows a fall of 6.8 points to 74 in June, about where it stood in January
It was much the same story south of the border where the CBOC’s US index dropped for the fourth month in a row to 62 points, also the lowest level since the start of the year.
Economists often don’t put a lot of stock in consumer confidence surveys, but Jennifer Lee, a senior economist with the Bank of Montreal, said there is reason to take these results to heart.
She said Canadians and Americans have been bombarded with daily reminders of the intractable nature of the European crisis and reports that businesses are holding back on investment and hiring. In this backdrop, it is natural to assume households may also be reluctant to go out on a limb on purchasing decisions, which would further hurt the economy.
“I think there is reason for pessimism given that there is so much uncertainty out there,” she said. “We’re still expecting relatively strong growth in emerging markets, but we’ve just downgraded our outlook for Europe.”
In Canada, Bank of Canada governor Mark Carney has suggested he will lower his outlook for growth in the upcoming monetary policy review in July in light of the economy’s disappointing 1.9% expansion in the first quarter and the continuing slowdown. Statistics Canada will issue the result for gross domestic product performance for April on Friday.
In a paper issued Tuesday, Capital Economics said it expects the global slowdown will further depress commodity prices and take the loonie to about 92 cents US by the end of the year—about five cents lower than the current level—and to as low as 86 cents US by the end of 2013.
“There are a host of downside risks to the Canadian dollar, including further falls in commodity prices and the diminishing prospect that the Bank of Canada will raise interest rates any time soon,” said David Madani, Canadian chief economist with the global economic forecasting group.
“What’s more, if Canadian oil prices decline much further, it is difficult to see how this would not upset the domestic economy, putting even more downward pressure on the Canadian dollar.”
The Ottawa-based Conference Board’s survey finds Canadians most gloomy about near-term job prospects and about the health of their finances.
The responses on job prospects were among the weakest since early 2009, when the economy was in the depths of the worst recession in decades. About twice as many (28.1%) thought the job market would get worse in the next six months as those (13.9%) who believed it would get better—an 8.4-point deterioration on the issue.
“The overall balance of opinion on this question has now been negative for the past 12 months, further evidence that consumer spending in Canada is likely to slow over the coming months,” the think-tank said.
As well, only 17.4% said their financial situation had improved in the past six months, while 20.4% said it had worsened—a deterioration of 3.6 points.
Somewhat surprisingly, attitudes toward making major purchases remained largely unchanged in June, but actual behaviour belies the answers on this question.
Statistics Canada reported last week that retail sales had fallen 0.5 per cent in April, and were down 0.8% in volume terms for the third decline in four months. As well, home purchase growth had slowed notably, with the exception of a few hot spots such as the Toronto condo market.
On a regional basis, confidence fell most sharply in Atlantic Canada and Ontario.
The declines in confidence in those regions were sharp, with Ontario’s index falling 10.3 points to 59.4, with only 9.2% of respondents saying they expected job growth in six months. The Atlantic Canada index fell 14.7 points to 60, as jobs expectations also fell precipitously.
Confidence was also down in the Prairie provinces, but not as much, and fell only marginally in British Columbia and in Quebec.
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