Quick take

Consumer Confidence Retreats Amidst Omicron Concerns

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  • After dropping 7 points in December, the Index of Consumer Confidence fell a further 0.6 points in January to start the year at 100.7 (2014 = 100), the lowest level in eight months. Besides, Canadians’ concerns about the future further intensified this month, especially in Ontario, Quebec, and British Columbia.
  • Despite the slight uptick in job numbers in December, the share of optimism in future job prospects continued to trend downward to open the year at 22.8 per cent.
  • Concerns over households’ future finances increased by 1.9 per cent this month. This increase is likely due to higher inflation expectations, which could further erode consumers’ purchasing power.
  • Given lingering supply chain concerns amidst the Omicron variant and possible interest rate hikes, only 16.1 per cent of survey respondents believed now is a good time to purchase large-ticket items, a 2.2 percentage point decrease from the previous month. Positive sentiments on major spending still have a long road to recovery compared with the average sentiment of 31 per cent in 2019.

Key Insights:

  • New year, similar issues! With new lockdown measures imposed this month, and COVID-19 cases and hospitalizations on the rise, it comes as no surprise that the Canadian consumer feels less confident. Future optimism might further erode as consumers spend less and save more due to the uncertainty facing future prices. However, it is important to highlight that Canadians now better understand public health restrictions and vaccine mandates than previous pandemic waves. This could prevent optimism from tanking as low as some of the previous times during the pandemic and yield a swift recovery from the fifth wave once restrictions ease.
  • The Omicron variant may further exacerbate ongoing inflation, as renewed restrictions in Canada and abroad tighten the supply of goods, services, and labour. Canadians are likely to delay their spending – especially for big-ticket items – until prices decrease. With a hazy timeline on when inflation will cool off and interest rate hikes lurking on the horizon, consumer confidence may drop again next month. A long, arduous journey lies ahead before consumer confidence returns to pre-pandemic levels.
Momanyi Mokaya

Momanyi Mokaya

Research Associate

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