Minimal Gains in Consumer Confidence in January
The Index of Consumer Confidence edged up 0.2 points in January.
- The Index of Consumer Confidence rose 0.2 points to reach 61.4 points in December, marking a second consecutive monthly increase for the first time since April of 2023.
- The percentage of individuals who felt their current finances had improved fell from 11.3 to 10.6 per cent. At the same time, consumers who thought their finances were worse decreased from 36.4 to 35.3 per cent. Individuals who considered their finances as unchanged increased from 50.6 to 51.8 per cent.
- Optimism towards future finances declined as the proportion expecting better finances fell from 16.5 to 15.8 per cent. There was an increase in those expecting no change (from 47.5 to 49.5 per cent). Meanwhile, the proportion of consumers who were expecting their financial conditions to worsen fell from 27.3 to 25.8 per cent.
- Regarding future job prospects, 51.9 per cent of respondents believed that there will be the same number of jobs in six months. Optimism towards future job prospects declined—9.8 per cent of respondents believe that there will be more job opportunities in six months’ time (down from 10.2 per cent in December). On the other hand, 25.4 per cent of respondents believed that their will be fewer jobs in the near future (down from 26.2 per cent in December).
- The outlook on major purchases was essentially unchanged from December, with 22.6 per cent of respondents thinking it was a bad time to make a big-ticket purchase. Meanwhile, only 9.0 per cent of respondents believed it was a good time to spend big.
Insights
The battle to tame inflation is far from over. The national inflation rate sat at 3.4 per cent in December (year-over-year) and the path back to 2.0 per cent is proving to be difficult. Complicating matters further, wage growth has remained robust, fueling some concerns over a wage-price spiral. Stubbornly high inflation means that Canadians will have to endure higher rates for a while longer. In our view, interest rates will start coming down in June of this year.
Canadian consumer confidence remains low, fueled by elevated costs of living and high interest rates. Real spending per capita has been on a downward trajectory since mid-2022, a trend likely to persist through the first half of 2024. The weight of higher mortgage interest costs and elevated grocery prices continues to bear down on household finances, as evident in today’s survey results. Three quarters of respondents believed their financial situation will either remain the same or worsen in six months from now, reflecting concerns over higher interest rates and a slowing economy. Despite this gloomy outlook, we are still predicting a soft landing, with a strong second half forecasted for 2024.
For more information on our household spending forecast, check out our Canadian Five-Year Outlook.
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