Fading real estate prospects sour Canada consumer sentiment

The Bloomberg Nanos Canadian Confidence Index fell to 53.8, from 54.5 a week earlier, the seventh consecutive decline, with the energy-rich prairie provinces reaching their lowest level in seven years, according to telephone polling by Nanos Research Group. While optimism about job security and personal finances has remained relatively stable, expectations for home prices have dropped after the government moved to tighten mortgage rules.

Consumer confidence has now reached its lowest level since September and erased gains made in the aftermath of Prime Minister Justin Trudeau’s October election victory. Economists predict the nation’s economy will post back-to-back sub-2 percent gains in gross domestic product in 2015 and 2016 for only the third time since World War II.

“After a period of economic exuberance following the Canadian federal election, we are now entering a period of greater pessimism in terms of the future strength of the Canadian economy,” Nanos Research Group Chairman Nik Nanos said.

Housing Woes

The share of survey respondents who expect local real estate prices to rise was 30.6 percent, the lowest since May 2013. The share of those who see prices falling was 19.2 percent, bringing the gap between optimists and pessimists to 11.4 percentage points, the narrowest since February.

The confidence outlook is worst in Canada’s energy-rich prairie provinces, where consumer confidence fell to 45, the lowest level since December 2008.

The region’s expectations sub- index, based on perceptions about the economy and real estate prices, fell to 34.5 from 35.6 a week earlier, also reaching its lowest level since 2008.

Confidence in the country’s most populous province, Ontario, fell to 55.9 from 57.9 a week earlier. It dropped to 59.2 from 59.9 in British Columbia. Canada’s mortgage rule changes were aimed at each province’s biggest city, Toronto and Vancouver, and raised the down payment requirement on homes valued above C$500,000 ($360,000).

The national expectations sub-index fell to 48.5 from 50 a week earlier. The measure has dropped for seven consecutive weeks after reaching a twelve-month high of 57.6 on Nov. 13. Meanwhile, the pocketbook sub-index, a measure of personal finance and job security, was 59.1, unchanged from the previous week.

Consumer confidence rose in Quebec to 55.1, from 53.8 a week earlier, with increases in both the expectations and personal finance sub-indexes. It’s the only region where the outlook improved.

The Bloomberg Nanos Canadian Confidence Index is a weekly measurement of Canadian economic sentiment, based on a rolling four-week average of 1000 respondents. It’s considered accurate within 3.1 percentage points, 19 times out of 20.

MBN

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