Quick Take

Tepid recovery in consumer confidence

Person loading bagged groceries into car trunk

The Conference Board of Canada’s Economist Anna Feng offers insights on our May Index of Consumer Confidence:

Consumer confidence edged higher in May on the heels of two months of record-breaking declines that had brought our Index of Consumer Confidence to a historical low. While the increase is certainly good news, the tepid gain shows the households across the country remain cautious about the economy and this will weigh on purchasing decisions over the coming months.

  • The consumer confidence index climbed 16.2 points in May, after hitting a record low last month. The index now sits at 63.7 (2014 = 100), slightly higher than its trough (56.3) during the 2008 financial crisis.
  • Consumers felt more confident in May compared to April across all regions in Canada. Atlantic Canada posted the largest monthly increase among provinces (up 21.7 points), while the Saskatchewan-Manitoba region recorded the smallest gain (up 9.5 points).
  • As governments announce plans to relax restrictions and slowly reopen the economy, Canadians are feeling more optimistic about the impending economic recovery. However, without a clear timeline on the return to normalcy, the rebound this month was tepid with the index still down nearly 60 points since February, before the lockdown.
  • Canadians are still worried about their financial situation six months from now. While the share of Canadians who feel pessimistic about their future finances dropped to 23.2 per cent in May, this proportion ranks as the second highest in history following the record-breaking 36.1 per cent in April.
  • With recent large swings in oil prices leaving Alberta’s economy on shaky ground, it is not surprising that its residents worried the most about their future financial conditions. More than 30 per cent of Albertans expect to be worse off financially six months from now.
  • The share of respondents who hold pessimistic views about future job prospects nudged down to 52.2 per cent in May, but it is still nearly twice as large as the long-term average (24.1 per cent). Alberta (59.2 per cent) and Ontario (57.0 per cent) topped the charts in terms of pessimism about future employment.
  • Quebecers are particularly concerned about their future economic and labour market conditions. Quebec is the only province where positive responses to questions about future finance and jobs dropped this month.
  • While most Canadians are slightly more optimistic about the future this month, many still do not feel that this is a good time to make a major purchase. In British Columbia, 75.4 per cent of respondents believe now is a bad time to make major purchases, higher than the peak (71.3) reached during the 2008 financial crisis.
  • Overall, this month’s rise in the consumer confidence index reflects Canadians’ improved optimism about the future. Nevertheless, the index remains significantly depressed by historical standards, suggesting that consumers will remain cautious with their spending over the coming months.

Tepid recovery in consumer confidence

(index, 2014 = 100)

10 0 2008 09 11 12 13 14 15 16 17 18 19 20 20 40 60 80 100 120 140

The survey dates were from May 1 to May 11, 2020.
Source: The Conference Board of Canada.

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Anna Feng

Anna Feng

Economist

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