A Prevailing Sense of Optimism Permeates the Atmosphere
The Index of Consumer Confidence increased 0.9 points in October, bringing the Index to 71.3 points (2014 = 100).
The Index of Consumer Confidence marks its highest level since July 2023:
- Consumer sentiment regarding future job prospects was a main driver of better optimism in October. Compared to September, the proportion of respondents anticipating an increase in job availability over the next six months rose to 8.3 per cent, reflecting an increase of 0.8 percentage points compared to September.
- Simultaneously, the percentage of individuals believing there would be fewer job opportunities decreased by 1.8 percentage points to 26.3 percent, the lowest level since last March. This trend is consistent with the most recent labour force survey data, which indicated stronger job gains in September.
- Optimism also improved when it comes to making major purchases. The percentage of respondents believing it is a good time to make a major purchase rose by 1.1 percentage points to 16.0 per cent. This is likely due to lower interest rates, which have continued to move down since June.
- Conversely, Canadians have become increasingly pessimistic about their present financial situation. The proportion of consumers believing their present finances have deteriorated over the past six months rose by 0.4 percentage points in October, reaching 29.2 per cent.
- The share of Canadians anticipating an improved financial situation in six months declined in October, falling by 1.2 percentage points to 15.3 per cent. Concurrently, the percentage of Canadian consumers expecting their financial situation to worsen experienced a modest increase, rising by 0.3 percentage points to 22.6 per cent. These findings underscore the ongoing financial pressures faced by Canadians despite falling borrowing costs.
Key Insights
Last Wednesday’s 50 basis cut by the Bank of Canada is expected to offer significant relief to businesses and households, especially for consumers with upcoming mortgage renewals. However, the lagged effect of monetary policy means that a recovery in business and consumer sentiment will not happen overnight.
Recent inflation data showed that headline inflation rose only 1.6 per cent year-over-year in September. Core inflation, which excludes food and energy, increased by 2.4 percent, mirroring the rate observed in August. The increase was primarily due to several components related to shelter. With inflationary concerns fading well into the rearview, we see the Bank continuing its rate cutting cycle well into 2025.
Canada-wide employment rose by 47,000 jobs in September, its biggest increase since April. Still, we expect only modest employment gains to round out the year, with job prospects improving in 2025 as the impact of lower interest rates filters through the economy.
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