Four in 10 Canadians report having lost ground in 2007, and fully one-half expect their household income to fall behind the cost of living in 2008, amid concerns that the U.S. economy will continue to worsen and that Canada’s inflation rate will soar.

Those findings are from a new national poll released today by POLLARA Inc.

One-half of all Canadians expect their household income to fall behind the cost of living, the most pessimistic personal outlook in 24 years, growing 18 points in only 12 months. Only 8% of Canadians expect their household income to more than keep pace with the cost of living, while 37% expect just to keep pace.

While 65% of Canadians believe their country is currently in a period of moderate growth, optimism for 2008 is cautious and restrained, with 31% expecting the economy to improve, and 26% feeling it will worsen — a 6-point increase in pessimism from last year. Though again the most pessimistic finding in 24 years of tracking, Canada’s economy is seen as much healthier than the U.S. economy, which only 17% of Canadians expect to improve in 2008. The majority of Canadians (61%) believe the U.S. economy will worsen this year.

Increased pessimism about the weakening U.S. economy, plus reduced optimism toward Canada’s employment situation, and a majority view that inflation will increase in 2008, have combined to lower Canadians’ expectations.

“This is not just a baseless prediction”, says Michael Marzolini, chairman of POLLARA Inc., “the number of Canadians who claimed they lost ground in 2007 has doubled from the year before. Fuel and housing prices, and those of many necessary consumer goods, are of greater significance to those who expect to fall further behind this year.”