The Index of Consumer Confidence Reached 77.3 This Month Following Its Third Consecutive Monthly Increase

  • The index of consumer confidence grew 0.6 points in May to bring its total growth since February to 5.9, marking a three-month streak of monthly increases.
  • Respondents’ views of their current finances shifted away from negative outlooks, as 2.2 percentage points fewer people believed that their current finances have worsened. This drop was paired with 2.4 percentage points added to the majority view that current finances have remained the same. Those who believed their finances were better saw no change remaining at 11.6 per cent of respondents.
  • Canadians’ views about their future finances and major purchases were tied for the largest percentage point increase in positive outlooks, each growing 1.3 points. With this increase, future finances saw its total of respondents who believe their finances will be better in the coming months grow to 17.0 per cent. Meanwhile, those who believed they would be the same also grew 0.1 percentage points while retaining its majority. The proportion of those who believed that their future finances would be worse came in at 23.1 per cent of responses, down from last month’s 23.7 per cent.
  • With major purchases’ 1.3 percentage point increase, the number of people who believed that now was a good time for a major purchase grew to 12.8 per cent of respondents, the highest point since May 2022. Up 0.2 percentage points since last month, those who believed that now was a bad time for a major purchase remained the lion’s share with 63 per cent. Those who were unsure if now was a good or bad time dipped below a quarter of respondents, with 1.5 percentage points fewer respondents bringing its May total to 24.1 per cent.
  • Future job prospects was the only question category that saw a decline in positive outlooks this month. Outlooks on the number of jobs that would be available in the future were down 1.6 percentage points to bring its proportion of responses to 13.6 per cent. The difference between those believing there would be more jobs and those believing fewer widened to 6.3 percentage points as the drop in those believing more jobs was matched with a 1.3 percentage point increase in those believing there would be fewer jobs. Those who thought future job prospects would remain the same as they are now remains the largest proportion of responses at 54.3 per cent.

Key Insights

  • Alberta wildfires have damaged its provincial consumer confidence while potentially hurting other provinces’ outlooks. May’s Index of Consumer Confidence had Alberta seeing the largest monthly decline dropping 8.7 points. At the core of this is likely the province’s ongoing wildfire concerns. On May 17, 91 wildfires were active, with 27 classified as out of control. The fires pose damage not only to property but also jobs. As of May 17, 11,990 people have remained evacuated. Evacuated individuals may have concerns about property and asset damage which could alter their outlooks on their current and future finances as they brace for any necessary repair costs, while others not already impacted may fear of fires spreading towards them. Job prospects are also likely damaged as many oil and gas companies have halted operations or curtailed production for safety reasons. With reduced production, we may see some contagion occur for consumer confidence. The reduced supply may translate to increased oil and gas costs nationally, hurting Canadians’ current and future finances. 
  • Consumer confidence may face trouble continuing its growth. On May 17, the Bank of Canada released its financial system review – 2023. This year’s review highlighted some possible issues facing many households. Among the points highlighted were elevated interest rates, declining house prices, high debt-servicing costs, and low homeowner equity, which could all damage households’ optimism. Narrowing in on some of these points, we see that many households are already facing or approaching elevated costs. Regulatory filings of Canadian banks and Bank of Canada calculations show that by the end of 2023, nearly 50 per cent of all mortgages will have been subject to a payment increase, and almost 100 per cent by the end of 2026. As a result of some homes already realizing high costs, debt service ratios (DSRs) for recent homebuyers have already increased significantly, with the median DSR on new mortgages rising from 16 per cent at the start of 2022 to over 19 per cent by year’s end and is likely to increase further as more homes are met with elevated costs. All this will likely dampen current and future finances, and major purchase outlooks nationally as households come to terms with the higher mortgage costs and the necessary belt-tightening to cope with it.