MNI POLICY: Canada Household Confidence Rebounds in Q3

Canadian consumer confidence rebounded in the third quarter from a prior record low, reflecting improvement in the job market, incomes and expected home prices following the Covid-19 lockdown, an MNI review of central bank data shows.

The MNI summary measure of the Bank of Canada's household survey data was +40 compared with -96 in the second quarter. Eight of 13 components in the summary measure showed improvement this time, while the previous results showed all but one figure had worsened.

MNI created the summary measure by assigning weights to questions tied to future spending decisions in an index adding up to 100 points. That means the index would move between -100 if every response is weaker than the previous quarter and to +100 if they all improved. MNI gives higher weights to questions more closely linked to consumer spending and to shorter-term views on the economy, and doesn't weight the magnitude of the swings.

All three questions around the job market showed improvement, with overall expectations of people losing their jobs in the next year declining to 15.3% from a record 18.2%. Expected spending growth in the next year also accelerated to 2.5% from 2.2%, and home price gains were seen as stronger nationwide and in the Ontario and British Columbia regions.

The weaker parts in the MNI calculations were linked to more subdued inflation and wages. The BOC's figures showed that wages over the past year-- not included in the MNI summary measure-- fell to a record low of about 1.1% in the latest report.

NEW RESTRICTIONS

The BOC gathered the data from Aug. 17-Sept. 1, before the latest round of more severe health restrictions in Ontario and Quebec, the nation's two most populous provinces. The central bank's consumer reports don't include a summary measure like for a business outlook published at the same time, or the monthly consumer confidence reports from the Conference Board.

While the MNI figures showed a big swing this quarter to +40, the latest figure is below a recent peak of +78 set in the first quarter of this year.

"Consumers expect that the overall recovery will be slow," the BOC's report said. "Many consumers expect their work situation will return to normal sooner than their spending."