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Has Consumer Pessimism Peaked?

The latest Harris Decima Investors Group measure of Canadian Consumer Confidence reveals:

  • The overall index of Consumer Confidence rose slightly in Canada, in the period from May through August. The index is based on five specific questions which probe sentiment about current and future economic conditions. During the same period of time, the parallel University of Michigan Index continued to fall.

Several of the five components that make up the index showed statistically significant shifts during the last few months:

  • Pessimism about the economic outlook for the coming year dropped from 38% saying things would be worse to 32%. A smaller drop was recorded in pessimism about the five year outlook, from 46% to 43% expecting deterioration.
  • The number of people who say they expect their personal financial situation to deteriorate in the coming year also slid by 3 points, from 20% to 17%. The number of people who say they are worse off today than they were last year, held steady at 24%.
  • The one negative movement was recorded on the question of whether now is a good time or a bad time to make a major purchase. Those saying it is a “bad time” rose marginally from 41% to 42%.

  • While pessimism has declined, it has not yet been replaced by growing optimism. All five indicators showed no statistically significant gains in optimism, meaning growing fear in May has shifted into growing uncertainty in August.

  • Regional variances in consumer confidence remain interesting. This time last year, Canadians living west of the province of Ontario, had a confidence level that was 10-points higher than their eastern counterparts. Today, east and west confidence levels are identical.

  • Finally, given the potential for a fall federal election campaign, it’s useful to assess the degree to which economic sentiment will matter in terms of political choice. Among those who think the next year will bring good times for Canada, 34% would vote Conservative, 31% support the Liberals. Those who are pessimistic about the next year would vote in equal numbers for the Conservatives and Liberals (33% each). Those who are optimists about the five year economic outlook, show a two point advantage for the Conservatives (36%, Liberals 34%), while those expecting the economy to be worse off in five years lean towards the Liberals (31% - 28%).

According to Harris/Decima President Bruce Anderson “These patterns suggest that Canadians have anxieties about the economy, but are resisting becoming too fearful. The fact that 17% think they will be worse off next year, and 25% think they will be better off also is continuing evidence that most people are not seeing the wolf at the door. Finally, to date, the political consequences of the economic mood may seem modest, but given the close nature of the national race between the Conservatives and the Liberals, a few percentage points make a difference. Any evidence that pessimism may have peaked, at least for the moment, is good news for the Harper Conservatives.”

Bill Chornous, Vice-President and Investment Strategist at Investors Group said, “With the recent decline in the price of oil, the prospect of lower gas prices may have reduced some of the price concerns of Canadian consumers. The influence of these price declines is reinforced by the uniformity of responses and consistent confidence levels across the country. This also explains why although optimism is not on the rise, pessimism is now declining.”

Each week, Harris/Decima interviews just over 1000 Canadians through teleVox, the company’s national omnibus survey. These data were gathered August 7th through 17th 2008 for a sample of just over 2,000 respondents. The poll’s margin of error is 2.2%, 19 times out of 20.

For more information contact:
Bruce Anderson
CEO
Tel: (613) 230-2200
banderson@decima.com 		Ron Arnst
Media Relations
(204) 956-3364
ron.arnst@investorsgroup.com