Quebec consumers are deeply discouraged, survey shows

Trop d’impôts tuent la croissance économique et tuent à la fin les revenus de l’État.

Situation très dangereuse pour le Québec, il faut se résigner à voir une variation du PIB inférieure à 1 % pour l'année 2012, situation insoutenable économiquement quand la croissance des dépenses augmente de 2% officiellement (en excluant les dépenses hors du périmètre comptables ou la magouille comptable standard que nous sommes habituer).

Extrait de: Quebec consumers are deeply discouraged, survey shows, Jay Bryan, Montreal Gazette, November 24, 2012

Quebec’s consumers are in a downbeat mood, dragging down spending in the province’s $100-billion-a-year retail sector. This is a warning that there are serious questions about how much more heavily they can be taxed in order to keep the provincial budget from drowning in red ink.

The warning signs were obvious this week, with Quebec’s performance in a nationwide survey of consumer confidence showing a sharp drop in optimism that, perhaps not coincidentally, coincides with the life of Pauline Marois’s new Parti Québécois government. Quebec wasn’t alone in this trend, so it would be unfair to blame the new government’s maladroit and short-lived musings about big hikes in several taxes, but the province was certainly a standout in the steepness of its decline.

The survey of 2,000 Canadians, carried out each month by the Conference Board of Canada, showed that consumer confidence has been drifting down across Canada for the past two months. The survey produces readings close to 100 during periods of good growth and prosperity. It fell as low as 50 nationally during the 2008 financial crisis and has fluctuated around 80 for much of this year.

Like the rest of Canada, Quebec showed its better readings near the beginning of this year, then weakened since summer, said Todd Crawford, the Conference Board economist who runs the survey. But while the pattern was similar, the magnitude was very different. The nationwide confidence index fell to 80.3 in November from 82.2 in September, a drop of 1.9 points. In the same period, Quebecers’ confidence collapsed to 67.9 from 78.5, a drop of 10.6 points. While British Columbia had an even bigger drop, it was from such a robust starting point that B.C. remains at 91.2, far above Quebec.

Who should care about this blizzard of numbers? For one, Quebec Finance Minister Nicolas Marceau. Both the size of the drop and the low level of the index in Quebec are signs of brewing economic trouble. Crawford says, for example, that past experience suggests a 10-point fall in the index — if maintained — means that retail sales will be about one per cent lower a year later.

Why the cloud of gloom over La Belle Province? Here’s a good guess, from economist Robert Kavcic at BMO Capital Markets: “A steady diet of heavier taxes over the last two years is probably the biggest thing.”

And we can’t blame the Marois government for most of this. Under the preceding Liberal administration, Quebec embarked on a brutal program of tax hikes rather than tackle the tougher questions of waste, corruption and over-regulation. These levies included the new health tax that, in restructured form, remains in place. More important, they also included big upward steps in the provincial sales tax and gasoline tax, measures that directly discourage consumer spending.

All told, the new Liberal taxes are sucking a stunning $4.6 billion out of Quebecers’ pockets this year, the Conference Board has estimated, a major drag on economic growth.

If you care only about the numbers, a tax increase balances the books just as well as an equivalent-sized cut in government waste. But there’s obviously a big difference in the impact on workers. If you have the hopeless feeling that your take-home pay is shrinking without any equivalent reward in the form of improved public services, one obvious thing you can do is spend less — or at least spend less in Quebec.

This situation would be bad for any province, but for Quebec it’s becoming dangerous. Consumer spending makes up the majority of all economic activity. When there’s less spending and less economic activity, there’s proportionately lower tax revenue for the government. And these days, it’s not as if the province’s retail sector is in such good shape that it can easily absorb a further drop in sales.

The latest retail data, for September, show Quebec to be the only province outside of New Brunswick where sales have actually dropped over the past year, falling by 0.4 per cent. That compares with growth of 0.7 per cent in Ontario, which is similar to Quebec in size and industrial makeup. (Across Canada, sales rose by 1.8 per cent, helped along by strength in resource-rich western provinces.)

Maybe worse, Quebec’s misery is deepening just as we enter the critically important Christmas season, which accounts for a disproportionately big chunk of many merchants’ annual earnings. Quebec retail sales in the month of September dropped by 0.7 per cent, even worse than the flat showing in Ontario and the meagre 0.1 per cent growth across the country.

Encouragingly, there are signs that Marceau and Marois have been quick to figure out that Quebecers can’t absorb much more punishment. The latest budget, in marked contrast to comments by Marceau just weeks earlier, contained no shocking new tax burdens. Even so, several modest new taxes, combined with spending cuts, mean that this austerity budget will actually dampen growth.

Nevertheless, if there’s a quick, credible follow-up to the shocking evidence of corruption in government construction projects, people might dare to start thinking that their heavy tax burden is at least going somewhere useful. Then we can begin dreaming of more efficient government and an eventual drop in our ridiculously heavy tax burden.