Consumer Confidence Rebounds Despite Rising Prices

• After dropping 7.6 points in February, the Index of Consumer Confidence rose by 2.2 points in March to 95.3 (2014 = 100), gaining back some of the loss witnessed last month.
• Concerns about future finances were evident this month, with 25.6 per cent of those surveyed sharing a negative outlook on future finances six months from now, a rise of 5.1 percentage points from February.
• Canadians’ reservations over current finances crept higher this month, with 29.2 per cent (25.3 per cent in February) of those surveyed expressing pessimism about their current financial situation, an increase of 4.0 percentage points from February.
• Reluctance over making major purchases remained largely the same as the preceding month, with only 15.7 per cent of survey respondents believing now is a good time to buy large-ticket items while 59.1 per cent feel otherwise.
• After a good job market recovery with the economy adding 337,000 jobs in February, Canadians’ share of optimistic views on future job prospects is at 26.8 per cent, 4.0 percentage points higher than last month. Suggesting that more Canadians are still optimistic that more job opportunities will surface six months from now.

Key Insights:

• The index stays below 100 for the second month. However, it is important to note that certain regions such as Ontario, British Columbia, and Alberta experienced increased consumer confidence, signaling that there is reason to be optimistic. Besides, the labour market remains upbeat, with most Canadians remaining optimistic that jobs will continue to return six months from now, as most regions drop mandates and a return to normalcy slowly resumes.
• Gas prices have a strong impact on the consumer psyche. Generally, consumers base their expectations of future inflation on their recent experience of actual price increases. Gas stations are a frequent reminder of current prices, and sustained pressure is being felt as a result of the Russia–Ukraine conflict. Looking ahead, optimism might further erode as consumers may decide to save more and consume less.
• On the positive side, Omicron appears to have peaked nationally, and provinces are easing back on their mandates and restrictions. This could lead to improved optimism as consumers begin to feel a degree of normalcy and slowly start to change their consumption patterns. We expect a much better travel season this year and a rebound in restaurant dining and recreation.