Consumer Confidence Has Four Consecutive Months of Growth

Canadian Economics

The Index of Consumer Confidence (ICC) rose 1.6 points to reach 67.8 points in March. This makes four consecutive monthly improvements for a total of 16.3 points gained.

  • Canadian consumers were generally more optimistic regarding finances in March while outlooks on major purchase conditions deteriorated.
  • The percentage of individuals that felt their current finances had improved rose from 11.4 to 12.5 per cent. Individuals who considered their finances unchanged was effectively the same at 52.7 per cent (0.1 percentage points higher). Consumers who thought their finances were worse decreased for the fourth month in a row from 33.5 to 32.3 per cent.
  • Optimism about future finances grew, as the proportion expecting better finances rose from 16.1 to 17.4 per cent. Like current finances, individuals who considered their future finances unchanged was effectively the same at 49.9 per cent (0.1 percentage points lower). Those anticipating worse conditions saw no change, staying constant at 24.5 per cent.
  • Sentiment on future job prospects was similar to that in February. The share of consumers who believed there will be the same number of jobs in the next six months increased 2.7 percentage points to 52.9 per cent. Fewer people were optimistic about there being more jobs in the next six months (decreasing from 11.0 to 9.9 per cent). The number of those predicting fewer jobs also decreased from 26.7 to 25.3 per cent.
  • The outlook for major purchases had a small decrease in the percentage of those who think it is a good time to buy (from 11.0 to 10.8 per cent), and an increase in the percentage of those thinking it is a bad time (from 64.7 to 67.6 per cent).

Key Insights

British Columbia records the highest confidence among provinces in March. Spurred by increased optimism and decreased pessimism in current and future finances, and future job prospects, March’s ICC score places the province well above the others in consumer confidence. However, this position might be difficult to retain. We forecast the unemployment rate in B.C. to reach 5.8 per cent by mid-year, above the 5.2 per cent observed in February. The increase will put downward pressure on wage growth and discourage some consumers on the state of the economy. As well, housing affordability will continue to be tested with record population growth and supply constraints in the residential market.

Households could be getting some relief from interest rates soon correlating to higher confidence. Despite inflation rates still above the Bank of Canada’s 2 per cent target, goods price inflation continues to moderate with the Bank’s data pointing to the economy being in modest excess supply. At the risk of the Bank of Canada over-ratcheting the economy with another hike, we assume that short-term interest rates have peaked, and the Bank will instead turn its head towards cuts. We forecast that interest rates will stay put until spring, with the first cut occurring in June followed by further cuts continuing into 2025.

To learn more about how Canada’s economy is expected to perform please visit the Conference Board of Canada’s five-year Canadian outlooks.