Consumer Confidence Sees Another Month of Growth

Canadian Economics

The Index of Consumer Confidence increased 4.9 points to reach 66.3 points in February, making it three consecutive monthly improvements.

  • Canadian consumers were generally more optimistic in February with almost all response categories seeing positive expectations grow more than negative ones.
  • The percentage of individuals who felt their current finances had improved rose from 10.6 to 11.4 per cent. Similarly, individuals who considered their finances unchanged increased from 51.8 to 52.6 per cent. Consumers who thought their finances were worse decreased for the third month in a row from 35.3 to 33.5 per cent.
  • Future finances optimism grew slightly as the proportion expecting better finances rose from 15.8 to 16.1 per cent. There was also a slight increase in those expecting no change (from 49.5 to 50.0 per cent) and a decrease in those expecting worse conditions (from 25.8 to 24.5 per cent).
  • In terms of future job prospects, slightly over half of consumers surveyed believed that there will be the same number of jobs in the next six months. However, this share did decrease slightly from 51.9 to 50.2 per cent. Optimism improved with more people believing there will be more jobs (increasing from 9.8 to 11.0 per cent). Those anticipating a smaller number of jobs also rose (increasing from 25.4 to 26.7 per cent).
  • The outlook on major purchases showed a small increase in the percentage of those thinking it’s a good time to buy (from 9.0 to 11.0 per cent), and a decrease in the percentage of those thinking it’s a bad time (from 68.3 to 64.7 per cent).

Key Insights

Consumers’ financial outlooks improved, likely influenced by news of weaker price gains as it was announced inflation cooled to 2.9 per cent in January. Although small, both current and future financial outlooks saw a decrease in pessimism this month. This could be a result of consumers expecting some respite on financial strains if interest rates are lowered in the near term. As inflation continues to approach the Bank of Canada’s target, the Bank’s focus will pivot to cuts. We forecast the overnight rate may start falling as early as this spring, with a gradual easing to around 2.25 per cent within 2025. Tracking the rate cuts will likely be a steady, but modest improvement in consumers’ confidence.

A technical recession was avoided. Canada’s economy contracted 0.1 per cent in the third quarter of 2023, and while October’s growth was essentially flat, real GDP grew 0.2 per cent in November and was essentially unchanged in December. The result was modest real GDP growth of 0.2 per cent in the fourth quarter of last year—avoiding a technical recession, defined as two consecutive quarters of negative GDP growth. This news likely contributed to the improvements in consumers’ outlooks this month. That said, the positive news may also mute future gains in confidence if the modest growth in the economy leads to softer than expected interest rate cuts.

To learn more about how Canada’s economy is expected to perform, please consult our five-year Canadian outlooks.