Consumer confidence shakier than stats warrant: economist

Canadians plan on spending $790 on the holidays this year, down $117 from 2007, according to a recent survey. (Canadian Press)Canadians are adopting a bleak recessionary mood, even though the numbers are not that grim, an economist says.

The Conference Board of Canada reported Monday that its index of consumer confidence has reached the lowest level since the recession of 1981-82. Yet the actual economic indicators are not that bad in Canada, compared with the United States, Europe and Japan, said Glen Hodgson, senior vice-president and chief economist.

"The bad news is out there," but now "it's become very personal," he said.

The index fell for the third month in a row in December, dropping 3.3 points to 67.7. The lowest point was 63 in the recession of 1981-82, Hodgson said. In the board's system, the index was at 100 in 2002.

The psychology of bad times is reflected in consumers' expectations that they will be worse off six months from now. "Respondents also viewed the job situation in their communities negatively," the board said.

Yet the latest employment statistics, for November, show that the country added 133,000 jobs in the first 11 months of 2008.

The board said last week that the federal government needs to introduce a stimulus package of up to $13 billion — about one per cent of the gross domestic product — to get the economy moving. But with the negative sentiment among consumers, that figure may have to be increased, Hodgson said.

The board's survey indicated that more consumers said it was a good time to make a big-ticket purchase. This bright spot may be a reflection of lower interest rates, Hodgson said.

Confidence fell in all regions, ranging from a marginal decline in the West to a 7.8 point drop in Atlantic Canada, the board said.

Its survey of 2,000 Canadians was conducted between Dec. 4-12.