The Conference Board of Canada says its Index of Consumer Confidence fell 12.1 points to 52.6 (2014 = 100) in February, the largest decrease in a year and a half.
Here are some of the key findings from the latest Index:
- After showing some improvement in the previous month’s survey, the index of consumer confidence has now fallen to levels similar to the pandemic era, marking the third largest drop in confidence since April 2020. This month’s decline in confidence is widespread across all regions, with the balance of opinion worsening in all survey questions.
- The biggest decline in confidence was observed in overall finances. The share of households perceiving a deterioration in their current financial situation rose 2.7 percentage points to 33.9 per cent. Simultaneously, the proportion of consumers foreseeing a degradation in their future financial outlook increased 3.7 percentage points to 29.2 per cent, the largest proportion in two years.
- Despite signs of economic stabilization, the outlook for personal finances remains dim, suggesting that factors beyond moderating headline inflation and falling interest rates are shaping the consumer sentiment.
- Views on major purchases followed a similar trend. The share of consumers thinking it is a bad time to make a major purchase increased 3.5 percentage points to 62.6 per cent. However, there has been some improvement when compared to last year. The proportion of households viewing it as a bad time to make a major purchase decreased by 2.1 percentage points compared to February 2024.
- Sentiments about the labour market have been downbeat for the last couple of years and this month is no different. When asked about future job prospects, the proportion of respondents anticipating fewer job opportunities six months from now increased 9.0 percentage points to 41.0 per cent, the largest share in 4 years. Meanwhile, the proportion of respondents expecting better employment prospects declined by 1.1 percentage points to 6.2 per cent.
“While no broad tariffs have been imposed yet, the uncertainty surrounding their occurrence is weighing on consumer confidence. Even with stabilizing inflation and a continuing key rate-cutting cycle, the looming trade war across the border is fueling concerns among consumers, affecting their economic and financial outlook,” said the Conference Board.
“The imposition of tariffs on Canadian goods is expected to adversely affect numerous domestic industries, potentially resulting in job losses and bankruptcies. On the other hand, the introduction of retaliatory tariffs, coupled with a weakening loonie, is likely to create inflationary pressures, eroding consumers’ purchasing power, further exacerbating financial strain and contributing to broader economic challenges.
“The imposition of broad tariffs by the U.S., Canada’s major trading partner, would represent a shock of significant magnitude, perhaps eventually leading into a period of recession while simultaneously fueling inflation. Such circumstances will challenge the Canadian monetary policymakers as the central bank will be forced to navigate the delicate balance of combating rising prices while attempting to stimulate growth in a shrinking economy.”
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