Consumers in Canada enter the year riding a wave of optimism that the worst is over. The nation’s households reported a surge in confidence in the final weeks of 2020 that has brought sentiment back to pre-pandemic levels for the first time since the economy crashed last year, according to polling by Bloomberg News and Nanos Research Group.
It’s a remarkable recovery that highlights just how much Canadian households have emerged from the deep economic crisis largely intact — cushioned by massive income support payments, a strong rebound in jobs, surging home prices and stock market gains. That’s a positive signal for the overall economy, stoking expectations of a rush in consumer spending once restrictions are finally lifted.
“Canadians closed out 2020 with regained confidence,” Nik Nanos, chief data scientist at Nanos Resarch Group, said in a statement. Every week, Nanos Research surveys 250 Canadians for their views on personal finances, job security and their outlook for both the economy and real estate prices. The Bloomberg Nanos Canadian Confidence Index, a composite gauge based on a rolling four-week average of poll responses, rose for a fifth-straight week and ended the year at 56. That’s the highest since mid-February.
The index had plunged by a record one third in March and April, before beginning its climb back over the summer. The rebound stalled between September and November amid a second wave of virus cases, but the rollout of COVID-19 vaccines in December sent sentiment levels back up, buoying everything from job security to the economic outlook.
This comes despite a fresh wave of restrictions hitting some of the country’s largest provinces as authorities struggle to lower virus cases. “People can see the light at the end of the tunnel,” Nathan Janzen, an economist at Royal Bank of Canada in Toronto, said by phone.
The numbers show the extent to which efforts by the Bank of Canada and the federal government to flood the economy with cash have shored up household balance sheets. The interest rate cuts by the central bank have fuelled the housing market, sending prices to records, while government support more than offsets falling incomes.
Real estate optimism has reached all-time highs with 51% of respondents expecting housing prices in their neighbourhood to increase in the next six months, according to the poll. That’s the highest share on record in data going back to 2008.
Not all families are better off. The data show that Canadians with higher incomes are reporting a stronger rebound in confidence than lower-income households. Among respondents with incomes of more than $75,000 (US$59,000), confidence levels are at the highest in more than a year, well past pre-pandemic levels. People with incomes below that threshold have yet to see confidence levels fully rebound.
Source: Financial Post