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Canadians are showing the first signs of economic distress from the fallout of the coronavirus crisis, with consumer confidence taking a sharp turn down last week.
The Bloomberg Nanos Canadian Confidence Index dropped to its lowest level in more than a year, falling to well below historical averages. It’s a troublesome -- though not unexpected -- development as Canadians brace for an economic slowdown amid financial market turmoil and falling oil prices. The index, however, is still higher than some of the worst readings recorded after the last oil shock in 2015.
Preventing the public-health crisis from turning into a prolonged economic downturn and outright recession has become the number one priority, prompting a dramatic coordinated response Friday from Canadian policy makers to prop up sentiment. That included a second half-percentage-point interest rate cut by Bank of Canada Governor Stephen Poloz in as many weeks, a move from the country’s banking regulator to free up capital for banks to lend more and a pledge by Finance Minister Bill Morneau to deliver a “whatever it takes” fiscal stimulus plan this week.
“In situations like this it’s consumer and business confidence which tend to erode and that causes decisions to slow down,” Poloz said at a joint press conference with Morneau.
Every week, Nanos Research calls 250 Canadians for their views on personal finances, job security and their outlook for both the economy and real estate prices. Bloomberg publishes four-week rolling averages of the 1,000 telephone responses. The current rolling average stretches back to before the recent market meltdown, suggesting the confidence numbers are poised to decline further.
The aggregate index number dropped to 54.3 last week, its lowest level since February of 2019. The one-week decline is the largest since last fall.
Among the four questions, the biggest drop was seen in perceptions around the economic outlook. Some 46 per cent of respondents said they now expect the economy to worsen over the next six months, the highest proportion since July 2018 and up from 40 per cent a week earlier.
“If I was to take a look at the numbers today, what we’re realistically looking at is the likelihood of a recession within the next six months is now quite high,” Nanos Research Group Chairman Nik Nanos said by phone.
Expectations around housing prices also took a hit last week, though impressions around job security and personal finances were steady.