They’re saying it again. Those two mystical words: Consumer confidence.
This story in today’s Toronto Star references a Conference Board of Canada report that predicts Canadians like you and I will pull our nation out of the depths of economic despair by opening our wallets and spending. The euphemism for this heroic behaviour is ‘consumer confidence’.
The thing is, we’ve done it before. Shortly after 9/11 the North American economy started to slump but average shoppers like you and I pulled out our credit cards and opened lines of credit in a mass movement to buy new cars, renovate our homes, mortgage ourselves to the hilt by buying houses in a rapidly inflated market.
In short, we rescued ourselves from recession.
Governments awash in fiscal surpluses didn’t do it. They used to torque things up in bad economic times by investing in infrastructure and public services. Not last time, and our current Prime Minister suggests no ‘bailouts’ can be expected this time either.
Corporations, rolling in 40-year record profit highs, didn’t do it either.
Ordinary Canadians did it.
Since we are so trigger-happy to pull out the plastic, who can blame industry analysts for predicting citizens will spend once more? A little retail therapy is good for what ails us, right?
Consider this dirty little secret: Many Canadians really can’t afford to pretend we are our very own personal Bank of Canada.
Truth be told, Canadians didn’t fund the last economic turnaround by pulling rainy day savings out from underneath the mattress.
Stagnant incomes and rising costs have squeezed savings out of many Canadians’ budgets. Average Canadian household savings have practically dried up, plummeting from $7,500 in 1990 to $1,000 today.
In place of savings, Canadians have been steadily, systematically racking up record-high household debt.
At least 60% of Canadians under 45 are mired in debt.
Some leave university so far behind the eight-ball -- with average student debt levels of $40,000 -- it’s hard to get ahead.
Others hawk themselves up to their eyeballs just for a chance to ‘own’ a home – that symbol of security in these insecure times – they may never be able to pay off.
No wonder 49% of Canadians tell Environics Research they are one or two paycheques away from being poor. Canadians are sick with financial worry.
And yet, their governments, their corporate leaders, their industry analysts are telling them to keep on charging it. In other words, they are encouraging average citizens like you and I to privatize the risk of a tumultuous global economic market. To work harder, to get smarter, to take our tax cuts and spend like mad.
And we will – undoubtedly we will.
But let’s not confuse consumer spending with confidence.
-- Trish Hennessy
(PS: For a more technical take on all this see this Progressive Economics Forum blog.)