Canadian households are anxious about the economy, despite the parade of above-normal expectations. The Conference Board’s Consumer Confidence Index plunged to a new record low in March. Economists at BMO wrote to investors explaining its no surprise with the trade war compounding cost of living pains. They also don’t see any improvements on the horizon.
Canadian Consumer Confidence Plunges To A Record Low
Canadian households have never felt more uncertain about the economy, a remarkable accomplishment considering recent global events in the past decade. The Consumer Confidence Index fell 8.4 points to 44.2% in March, following a 12-point drop in February. The index is now at the lowest level in its history, and has dropped in 4 out of the past 5 months.
Consumer confidence is less of a read on the economy, and more of a self-fulfilling prophecy. Anxious consumers proceed cautiously— saving more and pursuing fewer risks, like starting a business or making big investments. As a result, the recent positive economic data reported is overshadowed by households inducing a slowdown, amplifying headwinds. Policymakers that can keep consumers calm and stable are underappreciated, aren’t they?
Canadians Have Economic Anxiety Due To Trade War, Cost of Living
Consumer sentiment saw a brief improvement last year, but that faded towards the end of 2024. In general, households have been trying to gain their footing after a sudden cost of living shock and rising rates. Those difficulties ramped up with the new American administration declaring a trade war, bringing more uncertainty to the country’s economic outlook.
BMO senior economist Priscilla Thiagamoorthy wrote to investors, warning that household uncertainty is becoming a prominent threat.
“Canadian consumers are feeling very downbeat these days. And, it’s no wonder, given a brewing trade war with the U.S., stirring price pressures, an upcoming federal election and policy uncertainty,” said Thiagamoorthy.
Despite surprisingly robust economic data, with revisions making the data even better—the bank doesn’t see the uncertainty resolving anytime soon.
“With sentiment now pummeling to new depths, consumers are likely to stay cautious for some time,” explains the bank.