Heading into 2010, people appear more willing to make large purchases such as autos or vacations.Ryan Remiorz
Economic indicators suggest Canadians are entering the new year in a more optimistic frame of mind, with less anxiety about their jobs and a greater willingness to make major purchases such as cars and vacations.
Royal Bank of Canada is releasing its Canadian consumer outlook index Monday, and it shows an increase of eight percentage points in December from the previous month. Sixty per cent of those surveyed expect the economy to improve in 2010, while only 17 per cent think it will worsen.
"The data generally confirm what we're seeing," said RBC chief economist Craig Wright. "Improving global outlook, improving global financial markets, and improving outlook for Canada."
While Canadians are essentially divided about the current state of the economy, with roughly half saying it's good and half saying it's bad, most see better times ahead.
And the results suggest a significant decline in the number of people who are worried about keeping their jobs. That's in line with the latest employment data from Statistics Canada, which showed that 79,000 jobs were created in November, causing the unemployment rate to dip to 8.5 per cent from 8.6 per cent.
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The RBC survey also shows that the number of people who would be willing to shell out for a big ticket item has risen.
"It does seem to suggest, we think, that spending over the holiday season was generally better than expected, and in all cases better than feared," Mr. Wright said.
That's not only good for retailers; it should create a broader lift, with consumers accounting for roughly 60 per cent of the economy. "When consumers have some confidence that they will continue to have jobs, they tend to spend a bit more," Mr. Wright said.
Despite the optimism, the survey also suggests that Canadians are demonstrating financial prudence. Three-quarters intended to pay for their holiday spending with cash on hand rather than debt. Bank of Canada Governor Mark Carney recently warned Canadians against taking on more debt than they will be able to carry once interest rates begin rising.
"Given the weakness we've seen until recently in the labour market there hasn't been a lot of income generated, so to the extent consumers have been spending, and the data does suggest they've continued to spend, some of that has come through debt rather than cash on hand," Mr. Wright said. "To the extent we get income growth, we'll probably see more spending out of income rather than the continued runup in debt."
The central bank has said it intends to keep interest rates at a record low level of 0.25 per cent until at least midway through 2010, as it seeks to ease the flow of money to jolt the economic recovery. However, it could be prompted to backtrack on that promise if prices rise faster than expected.
RBC's survey, which was carried out by Ipsos Reid between Dec. 8 and Dec. 11, found that more than half of Canadians believe that interest rates will rise in the next six months.