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Canadian Consumers are Regaining Confidence

Canadian Economics

By: Loubna Zebiri

The Index of Consumer Confidence increased 3.3 points in September, bringing the Index to 70.4 points (2014 = 100) and marking its highest level since August 2023.

  • Compared with last month, consumers are more optimistic regarding their current finances. The share of Canadians thinking their present financial situation has worsened since six months ago decreased 3.2 percentage points this month to 28.7 per cent. Meanwhile, the share of consumers believing their current finances have improved increased 0.4 percentage points to reach 12.7 per cent. Canadians are gaining back confidence in their present financial situation.
  • When asked about whether it’s a good time to make a major purchase, the percentage of Canadians believing it is a good time to make such expenses rose 2.4 percentage points to 14.9 per cent. This aligns with the confidence consumers had regarding their current financial situation.
  • At the same time, the share of Canadians anticipating that their future financial situation would be better six months from now decreased slightly in September (down 0.5 percentage points) to reach 16.5 per cent. However, consumers expecting their financial situation to get worse also declined and at a faster rate, falling 1.2 percentage points in September to 8.8 per cent. These results highlight differing perspectives Canadian consumers have about the future. While some anticipate financial improvement, there are still some that expect their situation to worsen. This divide is partly explained by the accumulated household debt levels. Despite easing interest rates, a number of Canadians continue to grapple with the burden of high living costs straining their budgets.
  • The result was similar for future job prospects. Respondents held different perspectives regarding the future job market. In fact, the share of Canadians thinking there would be more jobs in the upcoming six months declined to 7.5 per cent, a drop of 1.0 percentage point compared with August.

Insights

The September survey results indicate that Canadians are less stressed regarding their present financial situation. The latest key interest rate cuts by the Bank of Canada are boosting the households’ confidence regarding their current finances. However, there are still some consumers that continue to have stress regarding their future financial situation. The weak economy and cooling labour market are making a portion of Canadians skeptical about the future.

The latest labour market indicators show that employment stayed relatively stable compared to July, resulting in a marginal increase of 0.1 per cent compared with the last month. Gains in part-time jobs were offset by losses in full-time jobs. Also, the unemployment rate increased by 2.0 percentage points in August to reach 6.6 per cent, its highest level since October 2021.

In July, seasonally adjusted retail trade data showed an increase compared to June. Canadian consumers appear to be experiencing some relief from interest rate cuts, leading to a slight uptick in their spending mostly in motor vehicle, clothing and healthcare.

Although inflation is slowing, Canadians still have some apprehension surrounding the future economic landscape. This unease is contributing to stress regarding financial prospects and a perceived decline in job opportunities.

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