Economic signals turning green as consumer confidence, home sales rise

Canadians are starting to believe that better times are just around the corner, and that's good news for the economy, analysts say.

The August consumer confidence survey from the Conference Board of Canada shows optimism returning to Canadian households, with the index rising for the sixth consecutive month to the highest level since April 2008, when the economy was firing on all cylinders.

And in a separate report, the Canadian Real Estate Association reported that sales of existing houses rebounded so strongly during the spring and into July that the housing group was dramatically revising upwards its forecast for the year.

"The difference in the resale market now, compared to the beginning of the year, is night and day," said president Dale Ripplinger, in increasing CREA's projection for sales this year to 2008 levels, from a previously thought 14.7-per-cent decline.

As well, the real estate body forecasts the general prices of homes across Canada will rise 1.5 per cent this year, a stark contrast to the situation south of the border, where both prices and sales have collapsed.

Both indicators were below levels that existed in 2007 when the economy was booming and the horizon contained few warnings of forthcoming turbulence, but they do support the general view that the sharp economic slide of the winter and spring has stopped.

They also coincide with the recent slowdown in job losses and steady growth in the retail sector, including June's surprise one per cent increase in sales.

Since October, 414,000 jobs have vanished in Canada, but the majority of the losses occurred in December, January and February.

Economists don't often get excited about consumer confidence surveys, mostly because they often reflect the economic news rather than predict future behaviour.

Douglas Porter of BMO Capital Markets said the latest survey is worth noting, however, because of its timeliness, and its track record in accurately predicting last winter's consumer spending slump.

"Given that the consumer confidence survey is the first piece of data we have from August, it's at least a hint that maybe some of the other indications we're going to see later on - spending, perhaps even employment - are going to be better than expected," he said.

The survey, conducted between Aug. 6 and 16, raised the consumer confidence index by 5.5 points from July to 88.4, the highest reading in almost a year and a half. Confidence has risen 18.2 points since the beginning of the year.

Another good sign was that all components of the survey showed gains: more respondents were upbeat about their near-future financial prospects, fewer were pessimistic about job prospects, and a plurality said it was a good time to make big purchases, such as a car or home.

On the critical jobs question, 25.6 per cent of respondents said there will be fewer jobs available in the next six months, a huge improvement from the 54.5 per cent who felt gloomy about jobs prospects six months ago. Twenty-one per cent felt there would be more jobs six months from now, an increase of over six percentage points from July.

"In general we see this as good news," said Todd Crawford of the Conference Board. "In terms of going forward, as people become more optimistic and they go out and spend more money, that is good news for the economy."

(prepared by Jullian Belltram/Canadian Press/Ottawa)