Concerns that the U.S. economy will worsen in 2007 has body-checked a four-year trend of ever-increasing economic optimism among Canadians, according to a new national poll released this morning.

According to the poll by Pollara Inc., some 42% of Canadians expect the U.S. economy to worsen this year, while only 14% believe it will improve. As a result, while six in ten Canadians believe that the Canadian economy has been enjoying a period of strong to moderate growth (down from almost seven in ten last year), only 30% expect to see an improvement in 2007, compared to 20% who believe the economy will worsen.

“This is the lowest level of economic optimism we have measured in thirteen years,” said Michael Marzolini, chairman of Pollara, “poor U.S. expectations have softened our positive outlook, though Canadians are resilient and trust that we can still do better than the Americans – at least this year.”

In addition, the survey found that Canadians are anticipating inflation to increase in 2007. Some 58% of Canadians expect higher inflation, while only 5% believe the cost of living will decline.

Also expected to increase in Canada this year are taxes (52% expect higher, 14% expect lower), as well as the national debt (43% expect it to increase, 22% believe it will decrease). Marzolini said that while this expectation is at odds with the current political environment of tax cutting and debt reduction, it is explained both by public cynicism towards campaign promises, and the lack of political stability resulting from three federal elections in only three years.

Employment is seen to be improving in 2007 (31% think it will improve, 21% believe it will worsen), though people’s personal apprehension about losing their job is up 3%, with 19% of Canadians now considering it very likely that they or a member of their immediate family will lose their job in 2007.

The most troubled region of Canada economically is Quebec, pointed out Marzolini. Some 49% of Quebec residents believe Canada is in a period of growth, while 42% consider the country to be in a recession. This compares to the national average of 61% believing Canada to be growing, while 20% believe it to be in recession.

The most positive aspect of the poll is that the personal financial situation of Canadians has been improving, with fewer people losing ground this year. Some 25% report their personal finances getting ahead, 52% are holding their own, while 20% (down 7% from last year) are losing ground. This improvement, said Marzolini, indicates that a potential 2.25 million Canadians may have turned the corner and moved from the red into the black.

The nation-wide survey of 1,215 representative Canadians was conducted by POLLARA between Dec. 11 and 13, 2006.