Consumer Confidence Continues Its Rise Going Into the Second Quarter of 2023

The Index of Consumer Confidence grew another percentage point in April to reach 76.7.

Starting the second quarter of 2023, April saw modest growth in consumer confidence. Leading the pack in positive sentiment growth was outlooks on major purchases. Positive outlooks on major purchases grew by 0.8 percentage points in April, however, they remain a small proportion of the responses (only 11.5 per cent of respondents). Respondents who believed now was a bad time for a major purchase remained the largest proportion of responses with 62.8 per cent, albeit down 2.4 percentage points from last month.

The proportion of respondents who believed current finances would remain the same as they were six months ago diminished slightly, dropping 1.2 percentage points to 52.0 per cent. This was the only response category which dropped this month for current finances. Respondents who believed their finances were better grew 0.2 percentage points, and the number of respondents who believed their finances were worse grew 0.5 percentage points.

Reflecting April’s Bank of Canada announcement that rates would remain where they currently are, the number of respondents that believed their future finances would stay the same as they are now grew by 1.6 percentage points to reach 52.0 per cent. This is matched by a drop of 1.7 percentage points in those who believed their future finances would be better. The number who thought future finances would be worse grew 0.4 percentage points but remained less than a quarter of the responses.

Employment growth continues in Canada, with March numbers showing an increase of 35,000 jobs and the unemployment rate holding at 5 per cent. With this news, we saw the number of respondents who held positive outlooks on future job prospects creep up 0.7 percentage points to just above 15 per cent of responses. Poor outlooks for future job prospects had the largest percentage point change among the response categories for this question as it slid 1.6 percentage points down to 18.6 per cent of responses. The number of those who believe future job prospects will remain the same saw marginal change, only increasing 0.1 percentage points but remains solid at 52.9 per cent of responses.

Insights

Service delays from the federal strike could damage outlooks. On April 19^th, more than 155,000 federal public service workers moved to strike, starting Canada’s largest strike since 1991. As part of the strike, services such as tax returns and the citizenship and immigration process are expected to be impacted. The result of this could mean delays in tax returns which could alter consumers’ spending, and possibly delays in obtaining immigrant or temporary foreign labour. Of particular concern are the delays in securing labour. As Canada enters spring, Canadian agriculture phases into its growing season, which typically picks up between April-June. The agricultural sector leans heavily on temporary foreign workers to facilitate operations and meet demands. In 2019 this group made up 20 per cent of the agricultural labour in Canada. If delays to the citizenship and immigration process continue due to a prolonged striking period, these temporary foreign workers may have trouble obtaining proper documents to enter Canada. This could mean lower crop yields, hurting farmers’ income, and translating to increased food costs to consumers.

On the heels of Quebec’s budget announcement, Quebec consumer confidence saw the largest increase among provinces this month. In April’s Index of Consumer Confidence, Quebec saw a 14.5 per cent increase compared to March. This uptick is most likely connected to the province’s newly released budget, which sees sizeable government spending of $148 billion. This includes, among other things, tax cuts, the option to opt out of pension plan payments if you’re over 65, and $400 million towards stimulating private investment. Given the budget’s composition the jump in confidence is not surprising. Current and future finances were impacted by measures such as the income tax cuts of one percentage point on the first two income brackets, which will afford an estimated additional $814 annually to individuals. Likewise, measures to stimulate private investments were likely to increase future job prospects as residents see this translating to job creation within the province. Still, the question remains whether these measures will be enough to keep confidence elevated as Quebec projects GDP growth of only 0.6 per cent for the year.