OTTAWA - Consumer confidence in Canada fell for the fourth consecutive month in September, sending a further signal that household spending is becoming a weak link in economic growth.
The Conference Board of Canada's consumer confidence index fell 1.2 points this month to 78.1 -- more than 18 points below where it stood at the beginning of the year.
"Consumers have taken notice of the slowing pace of economic recovery," the Ottawa-based think-tank said in its analysis of the survey of 2,000 consumers earlier this month.
Since spring, the recovery has been losing steam with growth rates near two per cent annualized, compared with 5.8 per cent in the first three months of 2010 and 4.9 per cent at the end of 2009.
Thursday's report on July gross domestic product is expected to show the first outright decline in GDP since last August.
But Finance Minister Jim Flaherty, while agreeing July GDP may show a contraction, said the economy is on track.
"In July, a lot of things happened in Canada like the introduction of the HST (harmonized sales tax) in two of the largest provinces ... so there are reasons for that. Overall, we're on track for the year," he said.
Ontario and British Columbia introduced the new sales tax on July 1, while Nova Scotia raised its HST by two percentage points, triggering a retail sales slide in those provinces.
Still, CIBC economist Benjamin Tal said the gloomier outlook of Canadians reflects very real problems facing the economy.
He noted that while only a few years ago consumers were increasing spending more than their income was rising, the reverse is happening now due to record high debt loads.
"In the next little while, consumer spending will be a shadow of itself; it will not be a major factor of growth," he said.
"We really don't have an engine of (robust) growth over the next year or so, and that's why we should be prepared for growth to go from six per cent to about 1.5 per cent."
In the survey, the Conference Board said Canadians reported that their financial position had worsened, that they expected employment to decline over the next six months and that they were less likely to make a major purchase.
The darkening sentiments are not dramatic, but they do point to growing pessimism in Canada, it said.
"The share of respondents who said they saw no change in their financial situation over the past six months rose to 62.6 per cent, suggesting that the majority of Canadians have not benefited from the recovery so far," the Conference Board said.
"Concerns over future employment are puzzling," it added. "Despite significant job creation through the first half of the year, 20.1 per cent of respondents continue to expect employment to decline in their communities over the next six months."
Furthermore, the number of respondents who expected job prospects to improve over the period dropped for a sixth straight month, 1.7 points to 17.8 per cent.
In the last jobs report, Statistics Canada noted that employment growth had slowed from 51,000 a month on average in the first half of the year, to 13,000 average in July and August.
Overall, confidence dropped in all regions except Atlantic Canada, with British Columbia recording the biggest decline, 7.7 points.
In Atlantic Canada, the index grew by 7.5 points to 88.2, while Quebec was virtually unchanged, and Ontario dropped to 67.3, the weakest confidence rating. Despite falling 2.9 points, the Prairies remain the most upbeat region with a reading of 96.3.
