Canada, U.S. consumers running for cover, surveys say

Consumers in Canada and the United States are increasingly gloomy about the economy as Christmas approaches, according to two new surveys released Thursday.

RBC's Consumer Attitudes and Spending by Household (CASH) index of U.S. consumer attitudes stumbled to near record lows in December. And, in Canada, consumer confidence in the same month plunged by 13 per cent compared to November, according to a study conducted by market research firm TNS Global.

Both numbers point to something many analysts had suspected: Christmas is likely to be tough for retailers in Canada and the United States.

"Consumer sentiment is back near the record low reached in July, and that is consistent with consumers retrenching in what is likely to prove a hard landing for the economy," said T.J. Marta, economic and fixed income strategist for RBC Capital Markets.

U.S. buyers not interested

RBC's CASH index stood at 15.3 for December, down 19.4 points from November's level of 34.7. That poor showing represented the gloomiest consumers have been since July, RBC said.

Consumer sentimentDec. Nov. RBC (for U.S.)15.3 34.7 TNS (for Canada) 83 95.6Source: RBC, TNS Global

Americans had started viewing their economic futures in a more positive light after record $147 US a barrel oil prices, reached in July, began falling. Currently, crude stands at less than $50 a barrel.

The global economic meltdown of the past four months, however, has obliterated any positive feelings consumers held during the summer. December's showing was less than one point higher than July's all-time record low of 14.6 points.

In October, U.S. consumer spending fell by one full percentage point, the largest monthly drop since the Sept. 11, 2001, attacks in the United States.

Americans' poor outlook in December was highlighted by the portion of the survey that focused on future expectations. Here, the index plunged more than 44 points, hitting a negative 22 points, the first time the figure slipped below zero since August.

Canadians consumers also scared

Canadian consumer sentiment had been holding up for the past few months despite the international economic crisis in the past few months. Indeed, retail sales in this country was 5.8 per cent higher in the January-to-September 2008 period compared to the same nine months in the previous year.

The latest TNS survey, however, indicates that buyers on this side of the border are becoming more pessimistic as the New Year approaches.

The index, a measure of present and future economic sentiment among individuals, stood at 84.3 points in December, down from 95.6 in November. The latest reading also stood in stark contrast to last December, down 20 per cent from last Christmas.

"It will be difficult for the Canadian economy to weather the current global economic climate if consumers restrain spending in the face of both real and imagined economic problems," said Richard Jenkins, a TNS vice-president and director of the marketing research firm's monthly tracking study.