Dec. 19, 2008, Toronto – Even the holiday season isn't kickstarting consumer spending,
as another round of dismal numbers Thursday indicated Canadians are
being cautious with their cash and an index of economic trends fell for
a third straight month.
Even the holiday season isn't kickstarting consumer spending,
as another round of dismal numbers Thursday indicated Canadians are
being cautious with their cash and an index of economic trends fell for
a third straight month.
Statistics Canada said retail sales fell 0.9 per cent in October,
while a Scotiabank study indicated Canadians are spending substantially
less on the holidays this year.
"The reality is that we'll
probably see spending remain on the back burner in the early part of
2009 as our economy goes through a significant amount of
consolidation," Bank of Nova Scotia economist Aron Gampel said in an
interview.
Gampel said deep discounts by retailers, along with
lower gasoline prices and interest rates, are helping to stimulate
spending, but not enough to offset a "sudden downdraft in expectations."
Scotiabank's
survey found that individual holiday spending on gifts, travel and
entertainment is expected to average $790, down by $117 or 13 per cent
from a year ago. That includes a 19 per cent drop in anticipated outlay
on gifts to an average of $563.
Statistics Canada said October
sales declined broadly, with home furnishings, electronics, automotive,
gasoline, clothing and general merchandise all down.
Gampel said the numbers indicate people are taking a more cautious approach to spending as the economic outlook darkens.
"Canadians
are still going to spend; they're just going to spend less, and that's
a more cautious and pragmatic approach to the changing economic
conditions," Gampel said.
Statistics Canada also reported that
its composite leading index fell 0.7 per cent in November, its third
straight retreat – and the largest since January 1991.
The agency
said the decline in the forward-looking economic indicator was
dominated by a large drop in the stock and housing markets.
The
contraction in consumer demand is piling pain onto the already
suffering factory sector, Canadian Manufacturers and Exporters said.
Fifty-nine
per cent of the companies in its survey have seen orders decline since
September, and 38 per cent expect employment levels to fall in the next
three months.
"The message we are hearing from manufacturers and
exporters across the country is that, 'We ain't seen nothing yet,"'
stated Jayson Myers, head of the industry association.
"Our members tell us that there are more production closures and job losses to come."
Also
Thursday, economists at National Bank predicted the world economy won't
expand more than 1.6 per cent in 2009. According to the International
Monetary Fund, growth below three per cent signifies a global recession.
But
National Bank said "a very accommodating monetary policy and
substantial budget stimulus measures from Ottawa" will help Canada
weather the downturn better than most developed countries.
It
predicts Canadian gross domestic product will be flat in 2009, with
unemployment jumping from its current 6.1 per cent to seven per cent,
and home construction slumping by 19 per cent.
Meanwhile, the
Conference Board of Canada estimated that profits in the country's auto
parts industry have fallen 38 per cent this year to $1 billion, their
lowest level since data on profits was first collected in 1999.
Also
Thursday, federal Finance Department documents show the government
expects at least four years of budget deficits even before spending a
dime on stimulating the economy.
However, a Canadian
Press-Harris/Decima survey indicates 54 per cent of the citizenry want
Ottawa to spend within its means, rather than going into deficit in an
effort to stimulate growth.
On the consumer spending front, Bank
of Montreal economist Doug Porter said Canada "is still light-years
away from the sharp declines underway in the U.S.," but "the slide in
Canadian retail sales is expected to take on a more ominous tone in
coming months, undercut by job losses, wealth destruction and sagging
consumer confidence."
TD Bank economist Diana Petramala said that
with consumer confidence at a 26-year low, 300,000 job losses expected
over the next six months and ongoing financial turmoil, "we expect
retail spending to slow to a 2.5 per cent pace in 2009, the lowest
annual growth rate on record."
And RBC economist Paul Ferley said
cautious consumers are one of the factors helping to drive the economy
to a projected 2.5 per cent annualized decline in the current quarter,
opening a recession that will continue into the first quarter of 2009.
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