The Canadian economy is facing a slowdown over the next few months, the Conference Board of Canada says, noting high gasoline prices helped push consumer confidence in August to its lowest level in over a year.
The private-sector group's index of consumer confidence survey for August found Canadians had a gloomier outlook on family finances, job- market prospects and big-ticket spending.
"Any time you start seeing energy prices rising - you start seeing it more and more at the pump - that starts to affect people's confidence,'' said Pedro Antunes, director of economic forecasting at the Conference Board.
"If you go to fill up your car and you're paying $60, you've got a lot less for consuming anything else. So restaurants, big-ticket items, stuff like that will suffer.'' In August, 54.4 per cent of respondents said the time was right for purchasing a home or car, a decline of six percentage points from July.
The index recorded a confidence decline of 5.6 points to 118.3, with decreases in all regions of the country.
It's the first time this year the index has seen a significant monthly decline and the first time it's come down below 120, which Antunes considers fairly low consumer confidence.
The July index was 123.9, with an average of 123 for most of this year and a range of between 120 and 125 for the last three years.
British Columbia experienced the sharpest decline, falling 7.8 index points. Confidence in Ontario declined by 6.9 points and the Prairies lost 5.5 points.
Don Drummond, chief economist at TD Financial Group, said he also expects the economy to show signs of slowing down for some time.
"The consumption has been roaring along, particularly in the first quarter this year - it was extraordinarily strong,'' he said. "I don't think it will decline, but I think it's going to come down to a much more modest pace of growth.'' The increase in gasoline pump prices and the natural gas prices consumers will face this winter will weaken consumption of other products, with or without an interest rate increase by the Bank of Canada this week," he said.
Drummond predicts the pace of consumption growth will slow down in the last half of this year, with a small reprieve in the first half of 2006 before it weakens off again.
But, he said, surveys like the index aren't 100-per-cent reliable, since consumers will often get pessimistic when asked about their outlook and end up spending money later anyway, or vice versa.
