Canada First Mortgage

Rising interest rates are weighing on Alberta consumers, who are growing more cautious about the strength of the economic rebound, a new survey shows.

Overall confidence levels remain positive, according to the poll conducted for PricewaterhouseCoopers LP by Leger Marketing and provided to the Herald. But half of respondents also say they have changed their spending as a result of the economic slowdown, a sign of concern over the impact of higher borrowing costs on personal debt loads.

“Consumers are starting to take a look at what (higher) interest rates do to their spending habits,” said Ian Gunn, Calgary-based partner of PwC’s private company service practice.

Among the most cited change was cutting spending at 77 per cent, while 58 per cent also said they shopped more sales.

Using cash instead of credit came in next at 41 per cent, followed by paying down debt faster at 35 per cent.

For Calgary consumers such as Mary Oliphant, the economy has yet to show signs of consistent growth and she has pared her spending accordingly.

“The economy still, to me, is not stable,” she said Monday while out shopping for school clothes for her teenage daughter at Sunridge Mall.

“I’m optimistic, but I’m being more diligent about where I’m shopping, I’m looking for good sales.”

The fluctuation in confidence levels follows the uneven pace of the economic recovery in Alberta, said one economist, pointing to signs of a cooling housing market and a lack of consistent job gains.

“All you need to do is really look at some of the key indicators in Alberta, in Canada, the U.S. to recognize that a lot of the ‘recovery’ has kind of run its course and is kind of losing steam,” said Adam Legge, chief economist with Calgary Economic Development.

“Everybody has been saying the first half of 2010 was going to be the best. We’re at a point where the economy is starting to have to stand on its own two feet and it’s not quite in a stable position yet — so people are tentative.”

The survey found overall business confidence dropped slightly to 107, down two points from May.

Consumer confidence was down one point to 104. An index above 100 reflects a positive sentiment.

“It is still very positive, but starting to show indications of trending down,” said Gunn.

“Those might slip a little bit further as we go into the start of the fall period — part of that is going to be where interest rates keep getting moved.”

The survey also found some variances over which part of the province would recover more quickly.

More business leaders — 34 per cent — said Edmonton and northern Alberta was the region that would rebound fastest, while 23 per cent selected Calgary and the southern part of the province.

That’s likely a nod to the pickup in oilsands activity, largely seen to fuel spinoff work in Edmonton and Fort McMurray regions, Gunn noted.

Consumers, however, were more evenly split on the pace of rebound between the two regions.

On the job front, consumers were less optimistic about the outlook for unemployment rates, falling four points to 110. That’s still higher than 2009 levels.

Business leaders remain more positive — a possible sign of future hiring intentions — as the index rose a notch to 135. But that is still down 20 points from March.

They were also less optimistic about current business conditions for the second consecutive survey.

For business owner Melinda Gravelle, demand has been off some months but appears to catch up in others. Her sense is the Alberta economy continues to soldier on, citing still busy stores and construction sites.

“It’s sort of evening out,” she said of bookings for her company Playtime Rentals, which lends inflatable play structures.

“Even though it’s been quieter some months, then we get quite busy.”

The survey, conducted between July 16 and 22, polled 900 Albertans, while 208 Alberta business leaders responded to an online survey.

The margin of error is plus or minus 3.3 per cent, 19 times out of 20.

lschmidt@theherald.canwest.com

© Copyright (c) The Calgary Herald