Canadians’ confidence in the economy has dropped this month, and with it, the chances for strong holiday spending, according to TNS Canada.
The research marketing firm said its consumer confidence index dropped 1.5 percentage points, erasing the small gain made last month. It ended the year at 96.1.
With the release of its November survey, TNS predicted this year would be the lowest-spending holiday season since 2005.
“Gloomy–that’s how we can describe Canadians year-end sentiments on the economy,” said Michael Antecol, vice-president of TNS Canada, in a release.
“The year clearly isn’t ending well for consumer confidence–indifference has given way to heightened negativity around both current and future economic prospects,” said Antecol. “It really isn’t too surprising that so many Canadians are planning to sit on their wallets this holiday season.”
TNS’ Present Situation Index, which is meant to show the current state of “economic and employment situations,” dropped 4.5 points to 89.
Its Expectations Index, which measures consumers’ financial expectations for the next six months, dropped 1.1 points to 104.6 after showing growth the two months prior.
However, TNS’ Buy Index, rose to end the year at 97. The Buy Index indicates consumers feelings on whether it’s a good time to make major purchases.
These results provide some hope for the future, said Antecol.
“No doubt it is a good time to make some of those major buys–retailers are very busy lowering prices. The key will be whether this momentum can be sustained into 2011.”
But he added a warning: “Canadians now have a higher debt-to-income ratio than our American neighbours. So, while these purchases may seem encouraging at first blush, they don’t necessarily improve the underlying economic fundamentals. They are often purchased through increased debt–especially credit card debt–and when interest rates inevitably rise, we’ll still be sitting on a house of cards.”
TNS conducts its Canadian confidence survey monthly as part of a global study in 18 countries. A total of 1,015 Canadian adults were interviewed between Dec. 6 and 12.
