Quick take

Consumer Confidence Climbs Higher Amid Rising Prices

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  • The Index of Consumer Confidence increased by 4.5 points in April 99.8 (2014 = 100), compounding an increase of 2.2 points witnessed last month.
  • Concerns about future finances remained a thorn in the shoe of consumers, with 21.9 per cent of those surveyed sharing a negative outlook on future finances six months from now, well above the 16.3 per cent average witnessed in 2019.
  • Canadians’ reservations over current finances edged lower this month to 25.7 per cent (29.2 per cent in March). At the same time, those sharing an optimistic view remained relatively unchanged at 13.6 per cent.
  • Only 17.3 per cent of survey respondents believed now is a good time to purchase large-ticket items. However, positive attitudes toward major spending still have a long road to recovery when contrasted with the average sentiment of 31 per cent in 2019.
  • With the economy adding 73,000 jobs in March, Canadians’ share of optimistic views on future job prospects is at 24.9 per cent, 1.9 percentage points lower than last month. Overall, Canadians are still confident, albeit less than the previous month, that more job opportunities will surface in the next six months.

Key Insights:

  • A solid economic recovery from the Omicron variant and the quick rebound in the labour market has boosted economic activity, absorbed economic slack, and boosted consumer confidence. However, affordability remains a key concern for consumers. Inflationary pressures exacerbated by supply chain disruptions and higher commodity prices undoubtedly affect consumer behaviour and consumption patterns. Furthermore, the recent Federal budget did little to offer some reprieve from the higher cost of living by providing targeted and temporary tax cuts. Consumers might have to change their spending patterns to match prices, hoping that no new COVID-19 wave will disrupt planned future spending.
  • Although consumers are experiencing higher prices, they are increasingly more confident about the economy. We attribute this inverse relationship to economic reopening and a healthy labour market. During the pandemic, many Canadians could not spend on various high contact services such as travelling, concerts and dining out. At the same time, consumers also became cautious about their finances and health. This is important because as the economy has been reopening in recent months, Canadians are tapping into their savings to cater to the rising prices. Therefore, the higher savings are acting as a buffer against higher prices. Still, this is likely to be a short-lived phenomenon as savings slowly diminish. Meanwhile, unemployment also hit 5.3 per cent in March, the lowest in 50 years, indicating a healthy labour market that translates to consumers' confidence over future job prospects, a key indicator in computing the index.

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Momanyi Mokaya

Momanyi Mokaya

Research Associate

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