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Consumer Confidence Plummets to a Record Low

The Conference Board of Canada’s Senior Economist, Cory Renner, offers insights on consumer confidence:

Consumer confidence fell to a record low and saw its steepest monthly decline in April. The drop comes on the heels March’s record decline and shows that COVID-19 is making Canadians across the country anxious. The speed of the decline is unprecedented, and a sign of how quickly Canada’s economy is deteriorating. For comparison, in the 2008 financial crisis, the index fell by 73 points in 13 months. In response to COVID-19, the index has declined by 73 points in just two months.

  • The Index of consumer confidence fell by 41.0 points in April, a record decline. The index level is now 47.6 (2014 = 100), the lowest level ever.
  • There’s no positive take-away from this month’s results. Every region except Quebec and Atlantic Canada are at a record lows, and the balance of opinion for each question worsened significantly.
  • It’s not surprising that consumer confidence has plummeted across the country given the effects that physical distancing is having on Canada’s economy and labour market. There have already been over 3 million employment insurance claims over the past month, and The Conference Board of Canada expects Canada to lose around 2.8 million jobs in March and April.
  • What’s most troubling about the index’s decline is how fast it happened. During the financial crisis, it took over a year for consumer confidence to go from its peak (129.4 in November of 2007) to its trough (56.3 in December 2008). The overall decline was 73 points over 13 months. Because of COVID-19, the index has fallen 73 points in just two months.
  • Canadians are especially worried about the future. Some 36.1 per cent of respondents expect their finances to worsen over the next six months—14 percentage points above the previous record of 22.1 per cent.
  • While it isn’t surprising to see Alberta with the most pessimistic view about future finances, it’s notable that Ontario and British Columbia also have weaker views than the national average.
  • Canadians are clearly worried about their future job prospects. A total of 53.0 per cent of respondents expect their job prospects to worsen, the most since 2009.
  • While all regions are pessimistic about job prospects, pessimism is strongest in Canada’s Prairie provinces. There, 59.3 per cent of Albertans and 57.8 per cent of respondents in Saskatchewan and Manitoba (combined) expect their job prospects to worsen, the highest across regions.
  • With little optimism about the future, Canadians are unwilling to make a major purchase. Over three-quarters of respondents think now is a bad time to make a major purchase, more than 20 percentage points above the previous record. This means Canadians are likely to hold off on buying a new home or vehicle in the near term.
  • Overall, this month’s results reflect the speed and depth of Canada’s economic slowdown. Every region across the country is feeling the weight of COVID-19 and the physical distancing measures required to slow its spread. The sharp plunge in consumer confidence supports our view that economic growth in the second quarter of 2020 will be the worst we have seen in the past 60 years.
  • The survey dates were March 27 to April 5, 2020.

Consumer confidence plummets to record low

(index, 2004 = 100)

2002 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 40 60 80 100 120 140

Source: The Conference Board of Canada.