Canadian, U.S. consumers more hopeful about jobs, finances, purchases
By Julilan Beltrame, The Canadian Press
OTTAWA – North American consumers are starting to feel better about their personal finances and the economy, a hopeful sign for the still fragile recovery.
Two fresh surveys, one by the Conference Board in Canada and another from the International Monetary Fund in the U.S., detected an identical pattern of rising confidence in January, although relative optimism continues to be stronger north of the border.
Canada’s confidence index rose 7.1 per cent this month to 88.1 points, the highest since the initial optimism coming out of the recession in the latter half of 2009 and early 2010.
Overall, the U.S. measure still lags Canada but in January it reached its highest level in eight months, rising to 60.6 from 53.3 in December, according to a Conference Board survey there.
Releases from both the IMF and the Conference Board note that levels are still below what would be considered positive, although they are improvements over recent months. Analysts generally welcomed the stronger consumer sentiment.
“In all, better consumer expectations in January bode well for a continued upturn in consumption…which will in turn prove supportive of overall economic activity,” said Martin Schwerdtfeger and economist with the TD Bank.
The increases follow a month of generally more upbeat economic news, particularly in the U.S., which has seen the early stages of an employment recovery and strong manufacturing activity.
But Conference Board of Canada economist Pedro Antunes said while positive news played a part, both in Canada and the U.S., there is also a predictive element to the surveys.
“This is really about looking ahead…and people are a little more optimistic,” he said.
Still, some economists cautioned against reading too much into surveys — for instance, whether more upbeat consumers will translate into more sales of homes, cars and appliances.
“It’s actions that speak louder than words,” said Scotiabank economist Derek Hold. “The way people manage their money and spend can be very different from how they say they will.”
While conditions appear to be improving, that comes after last year’s summer period faced generally downbeat news, when Canada’s recovery slowed to one per cent and the U.S. became so weak both the central bank and the government launched a second round of stimulus measures.
On Monday, the International Monetary Fund gave a modified thumbs up to the global recovery, while noting that advanced countries, including Canada and the U.S., will continue in the slow-growth lane for the next two years.
The IMF predicted Canada’s growth will average 2.3 per cent this year and 2.7 per cent in 2012 — one-tenth of a point less than the Bank of Canada’s estimate of the previous week. The U.S. will grow by three per cent and 2.7 per cent in the next two years, largely thanks to stimulus, the Washington-based financial institution said.
Both countries will get a better measure on how their economies are progressing in just over a week’s time when employment figures for January are released.
Canadians’ rising confidence was seen across a range of measures, but not uniformly across the country.
One of the clearest signals was that 28.1 per cent of respondents said they expect their financial situation to improve in the coming six months, up 3.3 percentage points. The number who felt the next six months looked worse, dropped by 0.7 point to 15.1 per cent.
The respondents were also more confident about Canadian labour markets, with those who felt job opportunities would increase over the next six months rising 1.4 percentage points, while those who felt conditions would get worse falling 2.7 points.
There was also a clear signal that more respondents felt good about making a major purchase, although the optimistic camp and pessimistic group each represented about 44 per cent of respondents.
“Whether this sudden improvement on the major purchases question can be sustained remains to be seen. But, coupled with the increasing optimism about future employment opportunities, it does suggest healthy consumer consumption going forward,” the Conference Board said.
Regionally, confidence rose the strongest in Ontario and the Prairies. Quebec registered a modest increase and British Columbia and Atlantic Canada were slightly less optimistic than they were in December.
The Canadian finding is based on the result of over 2,000 interviews conducted between Jan. 6 and 17. The margin of error is estimated at plus or minus 2.2 percentage points.