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Index of Consumer Confidence Drops in August

Canadian Economics

By: Loubna Zebiri

After 3 consecutive increases, The Consumer Confidence dropped by 0.1 points in August, bringing the index to 67.1 points (2014 = 100).

  • Compared to July, consumers seem more pessimistic regarding their current finances. The share of Canadians who think that their present financial situation has worsened increased by 3 percentage points this month, to 31.9 per cent. Meanwhile, the share of consumers who think that their current finances have gotten better increased by 0.7 percentage points to reach 12.3 per cent, the highest share since last August.
  • The result was similar for the future finances indicator. The share of Canadians who think that their future financial situation will get worse jumped 1.3 percentage points in August to 9.4 per cent, while the share of those who believe that their financial situation would be better has slightly increased (+0.3 percentage points) to reach 17 per cent.
  • Canadians reported a higher financial stress in August as result of still elevated interest rates and the higher cost of living. Consequently, consumers are quite meticulous when it comes to spending, especially in major purchases. In fact, the share of Canadians who believe it’s a good time to make a major purchase fell by 0.4 percentage points to 12.5 per cent.
  • Despite having a negative outlook about their financial situation, respondents were quite positive regarding job market prospects. The share of Canadians who believe there would be more jobs in the upcoming six months jumped to 8.5 per cent, an increase of 0.9 percentage points compared to July.

Insights

The August survey results indicate that Canadians continue to have a negative outlook regarding their finances. The two consecutive key rate cuts that have been made by the Bank of Canada so far did not change much for households’ financial situations as they are still feeling the burden of accumulated debt levels. Decelerating inflation and a cooling labor market are encouraging the Bank of Canada to pursue further cuts however.

Although there was a positive change in respondents’ feelings about the job market, the latest labor market indicators show that employment fell just marginally in July, resulting in zero growth compared to the previous month. A higher number of full-time jobs was offset by lower part-time work. And while the unemployment rate remained stable at 6.4 per cent, it is the highest rate since February 2022.

Despite decelerating inflation, Canadians are still feeling the impact of the hike in the cost of living over the past few years as prices remain high. As long as inflation is on target, the Bank of Canada will continue cutting its policy rate, however, the pace of cutting will take into consideration the overall economic activity and present labor market situation.

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