Household sentiment soured in December, as holiday bills piled up and the Bank of Canada raised interest rates for the seventh time in 2022, according to a recurring poll that tracks consumers’ financial outlook.
The latest version of Maru Public Opinion’s monthly household outlook index (MHOI) — shared exclusively with the Financial Post — found that 29 per cent of Canadians felt their financial position deteriorated last month, representing an increase of five percentage points from November. Meanwhile, 11 per cent of respondents said their financial position improved, compared with 14 per cent the previous month.
“Coming off of a fairly pessimistic November, Canadians were a little bit more upbeat in early December due to a combination of those who are younger making financial adjustments for better savings, retail bargains for lighter budgets, and the festive season,” said John Wright, executive vice-president of Maru Public Opinion. “However, in the aftermath, they’ve returned to their November more negative sentiments, soured by the impact of higher interest rates, inflation, and gift buying bills that are coming home to roost.”
The survey was conducted Dec. 29 and 30, a few weeks after the Bank of Canada raised its benchmark lending rate a half point to 4.25 per cent. Maru’s index came in at 88 in December, down one point from November and well off the most optimistic result of 107, recorded in July 2021.
The baseline for the index is 100. A score below 100 indicates negative sentiment, while a score above 100 is considered positive. Maru, a subsidiary of global research firm Maru Group, comes up with its household index by asking a representative panel of about 1,500 people a series of questions designed to probe how they feel about the economy’s prospects over the next 60 days. Maru started tracking Canadian households’ outlook in February 2021.
Asked if the economy was headed in the right or wrong direction, 63 per cent said the latter, unchanged from November. However, the number of Canadians who said they believe that the economy will improve in the next 60 days fell two percentage points to 37 per cent.
Sixty-three per cent of respondents said they could muster two or more months’ of savings to cover an unexpected cost, down from 69 per cent from November. The number of respondents who said they were likely to make a large purchase such as a car or furniture declined six percentage points to 13 per cent in December, meaning 87 per cent were unlikely to make such a purchase in the next 60 days.
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Financial markets appeared to be off limits.
Sixty-eight per cent said they were unlikely to invest in financial markets “because now is not a good time to do so,” up from 61 per cent. The last time Canadians held a similarly negative view was in September 2022.
“When we do the next survey it will be a real telltale sign of where we are headed in the spring,” Wright said, as Canadians continue to juggle inflation and interest rates that have risen on a “hockey stick” curve.
The benchmark interest rate began 2022 at 0.25 per cent, making last year the most aggressive tightening of monetary policy in the Bank of Canada’s history. Policymakers said they spike in borrowing costs was necessary to control inflation, which surged to 8.1 per cent in June and was hovering around seven per cent in November.