With the Canadian economy shedding jobs in January and February (we’ll get the labour numbers for March on Friday) and gasoline prices spiking because of the war in the Middle East, it’s perhaps not surprising that consumers are feeling anxious.

According to the latest survey results from Nanos, consumer confidence in Canada is “on a clear negative trajectory.”

As of April 3, the Bloomberg Nanos Canadian Confidence Index came in at 46.9, down from 53.8 four weeks earlier and below 50 for the second week in a row (readings below 50 indicate that there are more negative responses than positive ones).

The index has averaged 54.8 since 2008 with the lowest reading of 37.1 reached in April 2020, just after the pandemic started.

All four components of the index were lower, with perceptions related to personal finances, job security, Canada’s economic strength, and local real estate values down compared to early March.

In addition to giving us a sense of how Canadians are, as a group, feeling about their finances and the economy, falling consumer confidence is concerning because it could lead to changes in spending habits that reduce economic output. More consumers may, for example, hold off on major purchases or spending on discretionary items.

We only have retail sales data up to January, but spending in the first month of the year and a preliminary estimate for February were pointing to a decent start to the year for retail store spending.

The survey results do not tell us what caused the erosion in consumer confidence in March, but rising gasoline prices, and the fear that higher oil and natural gas prices will spill over into other areas, are likely factors.

As such, the longer and greater the impact of the war in the Middle East on inflation, the greater the likelihood that consumer confidence and spending will be negatively affected.

Canadian consumers have been remarkably resilient over the last half-decade in the face of the pandemic, high inflation, increased borrowing costs, and tariffs, so that trend could continue. Prudence, however, suggests that we should brace ourselves for some potentially major shifts in consumer spending if the war and its upward pressure on prices last much longer.  

Answer to the previous trivia question: At almost $64 billion last year, Illinois imports the most from Alberta. Illinois is home to major refineries and is a key destination for Alberta crude oil. 

Today’s trivia question: Which U.S. state imports the least from Alberta?