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Canada’s Consumer Confidence Only Sees Minor Improvements in May

Canadian Economics

By: Walter Bolduc

The Index of Consumer Confidence (ICC) saw a 2.0 point increase to 61.3 (2014 = 100) in May.

  • The percentage of respondents who felt their current finances had improved over the past 6 months fell from 12.0 to 10.9 per cent. Respondents who thought their finances had not changed over that time period rose from 51.4 to 52.9 per cent. Respondents who thought their finances were worse fell from 34.5 to 33.9 per cent.
  • Optimism about future finances increased, as the percentage expecting better finances in six months rose from 14.4 to 15.6 per cent. Respondents who thought their future finances will not change was effectively unchanged only growing from 49.2 to 49.3 per cent. Those who anticipate worse conditions decreased by 2.3 percentage points to 25.3 per cent.
  • The share of respondents who believed there would be the same number of jobs in the next six months increased by 0.6 percentage points to 50.6 per cent. The percentage that were optimistic about there being more jobs in the next six months was effectively the same, only growing from 9.1 to 9.2 per cent. Likewise, the share of those who predicted fewer jobs was effectively unchanged, falling from 28.0 to 27.9 per cent.
  • The outlook for major purchases had a small improvement. The percentage of respondents who thought it was a good time to make a major purchase increased half a percentage point to 10.0 per cent, while the percentage of respondents who believed it was a bad time fell from 66.5 to 64.8 per cent.

Insights

A June interest rate cut would help confidence, but strong employment growth could impact the timeline of the next cut. April’s employment leapt by 90,000—its largest increase since January 2023 and well above many forecasts for the month. This could weigh on the likeliness of a cut next month if the Bank of Canada interprets the significantly hotter than anticipated labour market as pushing up household demand and thus inflation. However, other factors such as the average hourly wage growth continuing to gradually recede (down to 4.7 per cent in April compared to 5.1 per cent in March) are still favourable signs for the Bank of Canada as it hints to a labour market that is still in excess supply.

Wildfire season could spell trouble for western Canada’s confidence in the coming months. Unseasonably warm temperatures have kicked off Canada’s wildfire season early with major fires already occurring across Alberta and British Columbia, and evacuation orders for thousands of residents being placed. Last year’s wildfire season was Canada’s worst recorded and had marked effects on confidence with both provinces’ confidence reaching their low point for the year during the season. An early start to the season could produce similar outcomes especially if it were to reach a scale like that of the year prior.

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