The temperature isn’t the only thing that fell precipitously in October. Recent data from the Conference Board of Canada found that after alarming spikes in COVID-19 infections began triggering the re-closure of businesses in certain parts of the country, consumer confidence experienced a chilling decline of its own.
The Conference Board’s Index of Consumer Confidence dropped 9.5 points to 74.1 in October. It was the largest monthly decrease since April.
Conference Board economist Anna Feng says the decline in consumer confidence is less than shocking.
“The overall October index didn’t come too much as a surprise,” Feng says. “We know that the government income support program started to wind down in September, so we were expecting that consumer confidence would be affected in the fourth quarter of this year.”
Feng was, however, surprised by the magnitude of decline seen in Alberta and Quebec, where the Index fell by at least 20 points compared to September. Prior to October, consumer confidence in Alberta had recovered to within inches of its pre-pandemic level, but with optimism around future finances and making large purchases both tumbling, the province’s Index, now 40, is less than two-thirds of what it was in February and lower than any other province by a considerable margin. Quebec’s 25-point decline from September led the country.
Three regions – Atlantic Canada, British Columbia and Saskatchewan/Manitoba – saw an increase in consumer confidence. Feng says it’s no coincidence that the provinces that successfully managed their COVID-19 outbreaks during the first wave are displaying more confidence as the second wave digs in.
“Those three regions also had a relatively lighter COVID-19 caseload compared to the rest of Canada, so this allowed their economies to reopen a lot quicker, which limited the negative economic impact of COVID-19 and helped the sentiment recover much faster than the rest of the country,” she says.
Canadians are particularly worried about what may happen to the country’s employment levels if more businesses are mandated by provincial governments. When asked “Do you expect more or fewer jobs in the next six months in your area?” the share of respondents who anticipate an increase in employment fell 4.6 percentage points, while those with a more pessimistic view increased 7.0 percentage points.
Feng, however, says the Conference Board is not expecting unemployment to spike to the same extent it did in April, when physical distancing and travel bans shocked the economy into paralysis.
“The shutdown in March and April was much broader than what we are seeing now,” she says. “In general, we expect the unemployment rate to remain below the levels in April going forward.”
With only 18.5 percent of those surveyed believing that now is a good time to make a major purchase, Feng feels it’s only a matter of time before weakening consumer confidence finally makes itself felt in the housing market, which has been cruising at a record pace for the past three months.
“Even now, the markets are still benefiting from that pent-up demand [from April and May],” Feng says. But once the suppressed demand exhausts itself and the federal government’s pandemic financial support begins winding down, she expects the housing market to cool, likely “in early 2021.”
One bright spot in the Conference Board’s data is that Canadians appear more optimistic about their finances compared to six months ago, which suggests they are feeling the effects of the country’s economic recovery. How long that micro-dose of positivity lasts will depend heavily on each province’s ability to balance the health of its economy against the health of its citizens.