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MNI POLICY: Canada Q4 Consumer Sentiment Up on Spending, Homes

OTTAWA (MNI)

Canadian consumer confidence rose in the fourth quarter after setting a record low during the first wave of Covid, led by spending gains and signs a resilient housing market is lifting prices.

The MNI summary measure of the Bank of Canada's household survey data was +60 compared with +40 in the third quarter and -96 in the second quarter. Nine of 13 components in the summary measure showed improvement this time, up one from the previous analysis.

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.

Expected spending growth rose to 2.8% from 2.5% in the third quarter and 2.2% in the second quarter, the BOC figures showed. Canadian home prices were seen gaining 4.98% over the next year, the fastest since at least 2016.

OVERALL SLOW RECOVERY EXPECTED

The weaker parts of the report were negative views of the prospect of leaving a job voluntarily or finding a new position. Some of the positive gains were also quite small, such as for income growth and wage gains.

The BOC gathered the data from Nov. 10- Dec. 1, following vaccine breakthrough announcements and 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.

"Overall, the economic recovery is expected to be slow and uneven, with possible long-term effects on the labor market," the BOC report said. "Nonetheless, there is growing optimism, as more people expect that life will eventually return to normal. This optimism likely reflects the impact of announcements about effective vaccines."

MNI Ottawa Bureau | +1 613-314-9647 | greg.quinn@marketnews.com
MNI Ottawa Bureau | +1 613-314-9647 | greg.quinn@marketnews.com

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