Briefly: “Consumers cheering up: IG poll” and more of Monday’s news

The spectre of further economic decline and climbing unemployment is weighing less heavily on the Canadian consumer, according to a Harris/Decima survey conducted for Investors Group.

The poll found that consumer confidence in February has returned to a reading of 67.0, the same level as in August 2008. Twice as many respondents felt they’d be better off a year from now (27%) than worse off (13%). In December, only 20% thought they’d be better off, while 18% said they’d likely fall behind.

The majority (57%) said they were doing as well now as they were a year ago, while 27% said they were worse off and 13% said they were better off now.

“Restored consumer confidence is an important factor in any potential economic recovery,” said Debbie Ammeter, vice-president of advanced financial planning at Investors Group. “It is interesting to note that Canadians seem to recognize that things could be difficult for most of this year, but yet there appears to be more who believe that they will be better off a year from now.”

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Retirement funds tapped in tough times

Canadian workers may be more confident than Americans about their finances and healthcare, but a disturbing number have tapped into their retirement savings to help cope with current economic troubles, according to a report from Sun Life Financial.

Nearly a third of Canadians are not satisfied with their retirement savings, yet one in 11 have cracked their nest egg, about the same as Americans who have done so.

“The fact that so many Canadians had to withdraw money from their retirement savings so soon into this downturn indicates how challenging it is for some and signals a concern for the future,” said Dean Connor, president, Sun Life Financial Canada.

Thanks to the social safety net, Canadians felt more confident than Americans about their post-retirement medical expenses — 37% said they were very confident, compared to 23% in the U.S.

The survey also found that respondents with financial advisors were consistently more optimistic about retirement planning than those without.

The Sun Life Unretirement Index includes five components, on which Canadians were consistently more optimistic than Americans. These sub-indexes measure attitudes on macroeconomics, personal finances, personal health, government benefits and employer benefits.

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Bank of Canada PRA to accept corporates

The Bank of Canada has loosened its rules on what it will accept as collateral under its term purchase and resale agreement (PRA) facility for private-sector instruments, with corporate bonds being added to the list.

To be eligible, the bonds must be issued by institutions subject to federal or provincial regulation that can demonstrate significant activity in the Canadian-dollar private-sector money and/or bond markets. The bonds must carry a minimum long-term issuer credit rating of A (low) by DBRS, A- by S&P or A3 by Moody’s.

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No plans for common stock issue: Manulife

Manulife Financial is downplaying rumours that it will return to market and issue more common equity to raise capital. The company said that the only reason it might do so would be to fund a strategic purchase.

“We may be one of the few global companies able to do a large strategic acquisition in these opportunistic markets,” said Dominic D’Alessandro, president and CEO. “Any transaction must be beneficial to our shareholders and must maintain our capital position for the benefit of our policyholders.”

Speculation that Manulife may seek additional capital stems from the company’s recent filing of a preliminary shelf prospectus in Canada and in the U.S. This would enable the firm to refinance through the issue of debt and preferred shares as market conditions allow.

(02/23/09)