Confidence crisis: Half of Canadians say worse off

The online survey of consumers done recently for Bensimon Byrne found that half of the 1,500 respondents believed they were less well off than a year ago and expected to be doing even worse next year.

Only six in 10 said they believed the economy was growing, a sharp decrease from three months ago when 73 % felt prospects were improving.

Other consumer confidence surveys have also tracked a sharp downturn in sentiment stemming from recent stock market turmoil and uncertainty over European debt.

Jack Bensimon of the Toronto-based advertising and advocacy firm says the plunge in consumer confidence is reminiscent of what happened in the summer of 2008 before the last recession.

But he said the fact Canadians are not merely reporting a loss of confidence but saying they are actually worse off could signal an intention to reduce spending, which would further weaken the economy.

“If that measure is declining, it’s flashing a big red warning signal about consumer spending,” he said.

“When they themselves are saying, ‘I’m worse off than I was a year ago,’ that means they haven’t gotten a raise, someone in their family has lost a job, their income has diminished or their debt has increased.”

He added that other studies by his firm have found more and more Canadians are living from paycheque to paycheque and battling big personal debt issues.

“This Christmas isn’t going to set any records (for gift purchases) by any stretch,” he predicted.

The survey was conducted Sept. 26 through Oct. 3, a period of sharp ups and downs on Canada’s main stock market, a dramatic decline in the value of the loonie and warnings that the U.S. and Chinese economies appeared to be softening.

Meanwhile a separate survey released Wednesday suggested that Canadian businesses confidence took a hit in August but has since stabilized. The Canadian Federation of Independent Business sampling found business confidence edged up one point to 62.7.

The reading is still regarded as weak, however, and is well down from the 2011 average of about 70.

TD Bank economist Sonya Gulati said the CFIB survey showed that “economic uncertainty still permeates the collective national psyche.”

While confidence has taken a battering since early August, most analysts in Canada are still reluctant to forecast a recession because real economic indicators have not been as dire. Most point to slower growth, not outright contraction.

Most economists also predicted that Friday’s key employment data from Statistics Canada will confirm the trend toward a weaker, but still growing economy. The consensus is for a gain of about 20,000 jobs, reversing August’s decline of 5,000 jobs.

But economists caution that if confidence continues to fall, it could lead households and businesses to hold back on purchases and investment and exacerbate the weakness. That is especially the case in a period of uncertainty such as currently exists, they add.

In a speech in New York on Wednesday, Finance Minister Jim Flaherty also stressed the importance of rebuilding confidence, particularly among investors. As he has done for the past few weeks, he strongly urged European leaders to act quickly to remove the uncertainty over Greece and other indebted eurozone countries.

“Our chief enemies now are uncertainty and delay, which will only cause more difficulties, make resolving the situation more expensive and create increased volatility,” he told the Canada-U.S. Securities Markets Summit in a keynote speech.