Canadians are feeling better about the economy

If our therapist is to be believed, positive thinking yields positive outcomes. The same may be true for the economy.

Driving the news: Canadian consumer confidence is at its highest level since May 2022, according to a recent Bloomberg-Nanos survey. Sentiment is still lower than the historical average, but more people are feeling optimistic about economic growth and their finances. 

• While some pessimism exists, outlooks should continue to grow sunnier as the Bank of Canada continues to cut interest rates and real estate prices recover.

Why it matters: Research shows a correlation between how consumers feel about the economy and how much they spend. This means consumer confidence levels can actually help grow the economy since 60% of Canada’s GDP is driven by consumer spending.

• It’s an example of the vibes-based nature of the economy. If enough people expect prices to rise, for instance, it can become, to some extent, a self-fulfilling prophecy. 

Yes, but: Consumer sentiment doesn’t always match economic performance. Just look at the U.S., where most Americans think the GDP is shrinking despite its rapid growth.—QH