Housing rebound helps drive Canadian consumer sentiment higher
Renewed momentum in Canada's housing market is buoying consumer optimism.
The Bloomberg Nanos Canadian Confidence Index — a composite indicator derived from weekly phone surveys of households — rose to 58.6 last week, up from 58.3 at the end of June. The measure is probably benefiting from a rebound in economic growth, lower borrowing costs and easing concern about a major housing correction.
The share of respondents who see local real estate prices rising in the next six months climbed to 43.2% at the end of July, the highest month-end reading since December 2017, just before tighter mortgage qualification rules came into effect. The new rules, along with rising borrowing costs, hastened the decline of nationwide home sales.
But the market is rebounding, helped by stronger economic growth and declining borrowing costs. Home sales in Toronto and Vancouver, the country's two priciest cities, each jumped 24% last month. Housing starts surged in June, led by construction of multiple-family dwellings such as condos and row houses.
It's a stark turnaround for Canadian consumer confidence, which until May had been in a rut for more than a year. A strong labor market isn't hurting. Respondents in the Nanos survey reported the highest level of job security since April.
Every week, Nanos Research asks 250 Canadians for their views on personal finances, job security, the outlook for the economy and where real estate prices are headed. Bloomberg publishes four-week rolling averages of the 1,000 telephone responses.
Canadians are a little less dour on the prospects for the economy. The gap between pessimists and optimists, at 6.2 percentage points in July, narrowed slightly from the 7 points a month earlier.
The national confidence increase was led by strong gains in Ontario and British Columbia. These were tempered by declines in Quebec and the prairie provinces.
Some 69% of respondents reported feeling secure or somewhat secure about their jobs. That compares with 10% who feel at least somewhat insecure. The difference between the two groups is the widest since April.
Among those who see higher real estate prices, the average weekly reading in July was 43.3%, levels not seen since May 2017. The share of those who see prices declining rose to 15.2%, up from 13.7% in June, but still below the average reading of 16.4% this year.