By Julilan Beltrame, The Canadian Press
OTTAWA – North American consumers are starting to feel better about
their personal finances and the economy, a hopeful sign for the still
fragile recovery.
Two fresh surveys, one by the Conference Board in Canada and another
from the International Monetary Fund in the U.S., detected an identical
pattern of rising confidence in January, although relative optimism
continues to be stronger north of the border.
Canada’s confidence index rose 7.1 per cent this month to 88.1 points,
the highest since the initial optimism coming out of the recession in
the latter half of 2009 and early 2010.
Overall, the U.S. measure still lags Canada but in January it reached
its highest level in eight months, rising to 60.6 from 53.3 in December,
according to a Conference Board survey there.
Releases from both the IMF and the Conference Board note that levels are
still below what would be considered positive, although they are
improvements over recent months. Analysts generally welcomed the
stronger consumer sentiment.
“In all, better consumer expectations in January bode well for a
continued upturn in consumption…which will in turn prove supportive of
overall economic activity,” said Martin Schwerdtfeger and economist with
the TD Bank.
The increases follow a month of generally more upbeat economic news,
particularly in the U.S., which has seen the early stages of an
employment recovery and strong manufacturing activity.
But Conference Board of Canada economist Pedro Antunes said while
positive news played a part, both in Canada and the U.S., there is also
a predictive element to the surveys.
“This is really about looking ahead…and people are a little more
optimistic,” he said.
Still, some economists cautioned against reading too much into surveys –
for instance, whether more upbeat consumers will translate into more
sales of homes, cars and appliances.
“It’s actions that speak louder than words,” said Scotiabank economist
Derek Hold. “The way people manage their money and spend can be very
different from how they say they will.”
While conditions appear to be improving, that comes after last year’s
summer period faced generally downbeat news, when Canada’s recovery
slowed to one per cent and the U.S. became so weak both the central bank
and the government launched a second round of stimulus measures.
On Monday, the International Monetary Fund gave a modified thumbs up to
the global recovery, while noting that advanced countries, including
Canada and the U.S., will continue in the slow-growth lane for the next
two years.
The IMF predicted Canada’s growth will average 2.3 per cent this year
and 2.7 per cent in 2012 – one-tenth of a point less than the Bank of
Canada’s estimate of the previous week. The U.S. will grow by three per
cent and 2.7 per cent in the next two years, largely thanks to stimulus,
the Washington-based financial institution said.
Both countries will get a better measure on how their economies are
progressing in just over a week’s time when employment figures for
January are released.
Canadians’ rising confidence was seen across a range of measures, but
not uniformly across the country.
One of the clearest signals was that 28.1 per cent of respondents said
they expect their financial situation to improve in the coming six
months, up 3.3 percentage points. The number who felt the next six
months looked worse, dropped by 0.7 point to 15.1 per cent.
The respondents were also more confident about Canadian labour markets,
with those who felt job opportunities would increase over the next six
months rising 1.4 percentage points, while those who felt conditions
would get worse falling 2.7 points.
There was also a clear signal that more respondents felt good about
making a major purchase, although the optimistic camp and pessimistic
group each represented about 44 per cent of respondents.
“Whether this sudden improvement on the major purchases question can be
sustained remains to be seen. But, coupled with the increasing optimism
about future employment opportunities, it does suggest healthy consumer
consumption going forward,” the Conference Board said.
Regionally, confidence rose the strongest in Ontario and the Prairies.
Quebec registered a modest increase and British Columbia and Atlantic
Canada were slightly less optimistic than they were in December.
The Canadian finding is based on the result of over 2,000 interviews
conducted between Jan. 6 and 17. The margin of error is estimated at
plus or minus 2.2 percentage points.