The Bloomberg Nanos Canadian Confidence Index continued to tumble in March, dropping to the worst month-end reading in more than a year as households grow increasingly concerned about the durability of the economic expansion.
The index ended the month at 56.8, the lowest since January 2017. Consumer sentiment has now declined every month this year, driven lower by worries over growth, with almost one-in-three Canadians anticipating the economy will weaken over the next six months.
Over the past three months, the drop in confidence from near-record highs reflected a deterioration in financial conditions for households. That includes rate hikes by the Bank of Canada, a weakening Canadian dollar, sharp declines in stock prices, and renewed worries about the housing market.
Combined with a slowing economy, an inter-provincial dispute over Kinder Morgan Inc.’s Trans Mountain pipeline between Alberta and British Columbia, and risks associated with outlook for the North American Free Trade Agreement, consumer angst is on the rise.
“We’re dealing with a one-two negative punch of trade uncertainty and energy uncertainty,” according to Nik Nanos, chairman of Nanos Research Group. “There is too much unfinished business related to Nafta and Kinder Morgan.”
The data also suggested Prime Minister Justin Trudeau failed to generate any boost in sentiment from his budget last month, Nanos added.
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The three-month drop in sentiment was one of the largest reversals for the confidence index since weekly tracking by Nanos began in 2013. The index was down 3.2% from year-ago levels. If sustained, the current deterioration in sentiment is consistent with a slowdown in growth of well below 2% on an annualized basis.
The percentage of Canadians giving the most pessimistic responses has jumped to 19.1%, versus 14.2% at the end of 2017 and 16.7% in March last year. The pessimism index, which is even more strongly correlated to GDP data, posted its first year-over-year gain since November 2016.
The decline continued to be driven by waning expectations for the economy. Only 18.3% of respondents said they expect the economy to strengthen over the next six months, down from 30.5% at the end of 2017. The share of Canadians expecting a weaker economy has increased to 30.9%, from 19% three months ago.
The share of Canadians who stated their jobs are secure was at 64.1%, the lowest rate since March last year. The percentage who said that their jobs are at least somewhat not secure touched 14.3%, the highest month-end reading in two years.