Canadian consumer confidence fell sharply over the week ended April 3. Ongoing tensions in the Middle East, which have pushed up oil prices, are weighing on consumer confidence and raising uncertainty about the impact on Canada’s economy. Yesterday, markets were hopeful that the US and Iran may reach a temporary ceasefire after several countries got involved in talks to end the conflict. However, Iran is searching for a more definitive end to the war, not a temporary solution. The Strait of Hormuz remains closed. US President Donald Trump is demanding the strait be reopened before the US pauses on escalated attacks on Iran, including on Iranian energy infrastructure.

• The Bloomberg Nanos Canadian Confidence Index declined to 46.9 over the week ended April 3 from 49.2 in the previous week. A reading below 50 denotes a net negative view. This is the lowest level of consumer confidence in almost a year, when the US imposed tariffs on Canada.
• Canadians are growing worrisome about the Canadian economy amid the uncertainty from the Middle East conflict and its potential impact on consumer prices.
• Compared to the previous week, fewer Canadians believe the Canadian economy will strengthen over the next six months. Canadians are facing a weakening labour market, higher energy prices and ongoing uncertainty about trade with the US.
• Meanwhile, S&P Global reported that Canadian private business activity increased slightly in March but remained contractionary. This marked the fifth straight monthly contraction as uncertainty, trade disruptions and now higher prices weigh on business activity.

The conflict in the Middle East is now into its sixth week and beginning to have a noticeable impact on consumer prices, economic activity and consumer confidence. Markets are hoping that the two sides are closing in on a ceasefire, but discussions have yet to yield one. In the meantime, uncertainty could remain high and financial markets might remain choppy.

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