Bloomberg News

Confidence in Canada Economy at Two-Year Low, Poll Shows

June 28, 2011

(Updates with currency and stock trading in sixth paragraph, analyst comment in seventh paragraph.)

June 28 (Bloomberg) -- Canadians’ confidence in the country’s economic prospects fell to its lowest in two years amid concern that the global recovery is stalling, according to a poll by Nanos Research.

The proportion of Canadians who predict a weaker economy in the next six months rose to 23.6 percent from 19.1 percent in March, according to Nanos’s quarterly economic survey. The share of Canadians who see a stronger economy fell to 29.2 percent from 30.3 percent. The Nanos Expectations Index, which also includes perceptions related to home prices, fell to 112.8 in the second quarter, the lowest since the second quarter of 2009.

The data suggest Canadian consumers may curtail spending as Europe’s sovereign debt crisis continues and evidence mounts that the U.S. economy is slowing, according to Nik Nanos, president of the Ottawa-based polling company.

While the Canadian economy may be relatively sound, news from abroad is “a bit of a wet blanket on the future,” Nanos said in a telephone interview. “The risk is that it becomes a self-fulfilling prophesy” and people spend less.

Bank of Canada Governor Mark Carney said June 15 this quarter’s economic growth rate could be less than the 2 percent pace the central bank had forecast in April, down from the 3.9 percent rate seen in January-March period. The bank also said last week that sovereign debt levels abroad are posing a greater risk to the country’s financial system than six months earlier.

The euro has slid 3.3 percent since the end of April amid mounting concern Greece may default, while the Canadian dollar has depreciated 4.1 percent. Canada’s benchmark S&P/TSX Composite stock index has lost 6.6 percent over that time.

‘Soft Spot’

“People will formulate opinions on the future based upon what’s happening to them right now and right now we’re in a soft spot in the economy,” said Derek Holt, vice president of economics at Bank of Nova Scotia in Toronto.

The Nanos poll found the state of household finances in Canada has been largely unchanged since March. While the share of Canadians who say their personal finances have improved over the past six months fell to 17.9 percent from 20.3 percent at the end of March, those who say they are worse off also dropped, sliding to 24.7 percent from 25.6 percent, according to the poll.

“Canadians are not worse off,” Nanos said. “However, in terms of where they think things will be in the next six months, they are much more pessimistic,” Nanos said.

The Nanos poll of 1,211 Canadians was taken between June 16 and June 19, and has a margin of error of 2.8 percentage points.

--Editors: Paul Badertscher, Kevin Costelloe

To contact the reporter on this story: Theophilos Argitis in Ottawa at targitis@bloomberg.net.

To contact the editor responsible for this story: Christopher Wellisz at cwellisz@bloomberg.net; David Scanlan at dscanlan@bloomberg.net.


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