Two-thirds of Canadians believe that the economy is still in a recession, and they’re increasingly concerned about the state of their personal finances, according to the results of a recent survey by the Economic Club of Canada and Pollara.

The December survey of more than 2,500 adults shows that Canadians are less optimistic about the state of the economy than they were a year ago, and expect the downturn to last much longer than previously believed.

“This year, a new set of caution and retrenchment has set in,” said Michael Marzolini, chairman of Pollara, who presented the results in Toronto on Thursday.

Only 38% of those surveyed feel that the Canadian economy will improve in the next year, compared to 54% of respondents last year. Furthermore, 20% of Canadians feel that the Canadian economy will worsen in 2011, compared to 14% last year.

Only one-quarter of respondents said they expect the economy to turn around by the end of 2011, with most expecting that the downturn won’t end until 2012 or 2013.

In contrast, nearly half of respondents last year expected the recession to end by December 2010.

“Such a drastic reversal of expectations clearly leads to a massive drag on optimism, and increases public worry and stress,” said Marzolini. “This worry manifests itself at the household level.”

Indeed, most of Canadians’ top economic concerns relate to their personal finances, including the cost of living, having enough money to retire, healthcare costs, the value of their investments and their own household debt load.

Fewer than one in 10 Canadians surveyed reported experiencing any gains in household income versus the cost of living. Most expect the cost of living to rise in the year ahead, and a growing number of citizens are concerned about making ends meet.

“It’s a return to basic economic survival issues,” said Marzolini. “Paying the bills, affording the house, putting the kids through school, looking after aging parents, paying for catastrophic drug costs, and hoping to have something left over for retirement.”

Marzolini said it’s critical for policymakers to understand this new hierarchy of concerns and priorities at the household level. He noted that Canadians are more eager to see governments reduce debt and deficit levels than to stimulate the economy, as they don’t want to see tax increases.

The negative consumer sentiment expressed in the survey sharply contrasts with results from the same survey conducted last year by Pollara. In late 2009, the number of Canadians who expected the economy to improve in the year ahead had tripled from 2008.

“Canadians were incredibly optimistic on all fronts,” Marzolini said of the 2009 survey. “It was the largest burst of economic optimism in more than a quarter century.”

The latest survey results do show some signs of improved consumer sentiment, however. The poll showed that compared to last year, a higher proportion of Canadians characterize the economic downturn as mild or moderate, rather than severe. In addition, Canadians are less concerned than they were last year about losing their job.

“We’re making progress, but it’s slower than expected.”

In terms of investing, the survey showed that Canadians are slightly less bullish on equities than they were a year ago. Ontarians, Albertans and British Columbians are most optimistic on the stock market, while Quebecers are much more bearish.