Canadian consumers are growing more optimistic about the economy, signaling a potential rebound in spending. The TNS Canadian Facts consumer confidence index rose to 94.1 this month, up from 90.5 in April and 83.7 in March. Michael Antecol, vice-president of TNS Canadian Facts, noted that consumers are increasingly discounting negative economic news in their future assessments.
The group’s present situation index, which measures sentiment about the economy and labor market, climbed to 78.9 in April from 75.3 the previous month. Its expectations index, reflecting views on future economic conditions, household income, and employment, increased for the fifth straight month to 101.4 from 97.4 in April.
The buy index, tracking whether now is a good time for major purchases, reached its highest level since July 2005, rising to 107 in May from 103.9 the previous month. Antecol attributed this optimism to the Bank of Canada’s historic low lending rate, suggesting Canadians may soon start making substantial purchases.
Statistics Canada reported that the annual inflation rate dropped to 0.4% in April, the lowest in 14 years, down from 1.2% in March. The economic downturn helped ease prices on items like gasoline and vehicle purchases. The Canadian economy contracted by 3.4% in the fourth quarter of 2008, with the central bank estimating a further 7.3% shrinkage in the first quarter of this year.
Last month, the Bank of Canada cut its key interest rate to 0.25%, pledging to maintain it through the second quarter of next year to encourage business and consumer spending. The survey, conducted between May 11 and 14 with 1,015 Canadians, had a margin of error of plus or minus 3.1 percentage points.