Consumer confidence flashes yellow alert

Written by ProfitGuide Staff

A monthly survey of Canadian consumers shows they became significantly less upbeat in August in their outlook for the economy.

All three indices in the Consumer Confidence Index from TNS Canadian Facts, a Toronto-based marketing research firm, showed declines last month:

  • The Present Situation Index, which measures consumers’ view of the current overall state of the economy and job market, slid from 117.9 points in July to 115.6 in August. (The benchmark for all the indices is 100 in May 2005.) But that’s the third-highest measured since the index launched in August 2004, suggesting consumers still see the economy as in good shape right now;
  • The Expectations Index, which measures where consumers believe the economy, household income and employment will stand in six months, dropped from a record high of 104.6 in July to 99.5 in August, an eight-month low;
  • The Buy Index, which gauges whether consumers think it’s a good time to make major purchases, fell from 95.4 to 91.7. This index has fallen over the last two years, and the August number marked a new low.

The study came in the wake of four weeks of turmoil in the Middle East and surging oil prices. “Consumer confidence has bounced back from previous short-term declines,” says Richard Jenkins, who directs the monthly studies for TSN Canadian Facts, “so it’s too early to say whether this drop represents a minor episode or the start of a period of longer-term weakness.”

He says the study shows Canadian consumers remain relatively upbeat and recognize the underlying strength of current economic conditions, but are concerned about the economy’s future direction.

Consumer confidence fell sharply in August in the U.S. A study for The Conference Board, a New York-based research group, showed the overall index at 99.6, down from 107.0 in July.

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