(Bloomberg) -- The big-spending Canadian consumer, who showed no sign of letting up in 2017, is entering the new year in an exuberant mood.
Consumer confidence neared record levels as the year came to a close last week, with sentiment buoyed by a booming jobs market, a strong housing market and an end-of-year jump in commodity prices. Telephone polling suggests broad-based gains in everything from job security to the outlook for housing, and across regions.
The Bloomberg Nanos Canadian Confidence Index -- a weekly composite gauge based on survey questions -- was at 62.2 for the week ended Dec. 29. That's the highest reading since the final week of 2009, when the economy was just beginning to emerge from recession, and bodes well for the durability of an economic expansion whose strength in 2017 surprised both economists and policy makers.
The big question in the new year is to what extent the economy decelerates from 2017's elevated levels, particularly with the Bank of Canada expecting to raise interest rates further. Much will depend on household spending, which has carried the country's economy for years and accounted for just about all of its growth since the collapse of oil prices three years ago.
There are plenty of reason for households to be optimistic going into 2018.
Canada's jobless rate in November fell to 5.9 percent. That's the first time it's fallen below 6 percent since 2008 and is one of the lowest jobless readings in the past four decades. Employers have added nearly 400,000 jobs over the past 12 months.
Average hourly earnings -- which have been stagnant for much of the past year -- are showing signs of accelerating. Canada's housing market has shown resiliency despite a number of new headwinds, including higher borrowing costs. Add to that rising stock prices and a stronger Canadian dollar that's boosted purchasing power.
And oil prices are finally on the rise again, which is giving a boost to Canada's energy producing regions. Sentiment in the prairie provinces has increased to the highest levels since 2014.
What Our Economists Say |
| “Oil prices breached $60 for the first time in a year and a half, a positive sign for the oil-dependent region and perhaps another signal that a period of normalcy is underway. The increase in economic activity has resulted in a 5.9 percent unemployment rate and 12 months of positive wage growth for Canadian households that is pushing consumer sentiment toward record levels for this cycle.” --Robert Lawrie, Bloomberg economist |
Here are some other end-of-year highlights from the Nanos surveys:
- The confidence index has been on a slow upward trend since bottoming out in 2015, but has seen particularly sharp gains since October amid the recent jobs boom, improving outlook for oil prices and robust housing markets. From a year earlier, the index is up nearly 10 percent.
- Despite higher borrowing costs and efforts by all levels of government to curb demand, Canadians are still extremely optimistic about the outlook for housing prices with just over 43 percent predicting real estate will continue appreciating. While down from the record levels of earlier this year, that's still well above the 37 percent recorded at the end of 2016.
- Quebeckers ended the year with the highest economic confidence levels in the country. That reflects a red-hot jobs market and some signs Montreal's housing is beginning to attract some of the speculative money that has fueled the Toronto and Vancouver markets.
- Commodities ended 2017 with a bang and so did sentiment in the prairies, which surged in the last few weeks of the year. The confidence score for the region last week hit 59, the highest since December 2014.
- The booming jobs market was one the biggest economic stories in Canada last year, and the surveys suggest this is starting to bolster job security considerably. The share of Canadians who say their job is secure reached a two-and-a-half-year high of 54 percent last week.
The Bloomberg Nanos Canadian Confidence Index is based on a four-week rolling average of 1,000 telephone respondents, who are asked questions about their personal finances, job security, the outlook for the economy and real estate prices. The latest round of polling ended Dec. 29. The results are considered accurate within 3.1 percentage points, 19 times out of 20.
To contact the reporter on this story: Theophilos Argitis in Ottawa at targitis@bloomberg.net.
To contact the editors responsible for this story: David Scanlan at dscanlan@bloomberg.net, Stephen Wicary
©2018 Bloomberg L.P.
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