Consumer spending is projected to decline as North American consumers lose their faith in the economic recovery.
The latest report from the Conference Board of Canada shows consumer confidence dropped in all regions of the country in June, while similar data released Tuesday in the United States shows confidence in that country has hit a five-month low.
As a result, fewer Canadians said they believe now is a good time to make a major purchase, and there are less Americans who say they are planning a vacation or purchase of a major appliance over the next six months. Interestingly, however, more Americans are actually looking to buy a home before the end of the year.
"We suspect that the fall in gasoline prices to just below $3.50 a gallon though, may have prevented confidence from slipping even further," said Amna Asaf, an economist at Capital Economics, referring to the U.S. survey results. This is the fourth consecutive decline in U.S. consumer confidence.
Consumer confidence rose in Canada over the first quarter of 2012, but has since wobbled back into negative territory. Concerns about the job market weighed on consumer confidence in both countries. Slightly more Americans reported it was harder to get a job over the past month, and confidence in Canada dropped most sharply in places were the level of employment has recently fallen.
"Concerns over future job creation factored prominently into this month's decline," said Todd Crawford, an economist at the Conference Board of Canada. "Negative sentiment was most prominent in Atlantic Canada and Ontario."
Employment edged downward Ontario and three of the four maritime provinces in May, according to data from Statistics Canada. In Ontario, fewer than 10 per cent of respondents believed there would be more jobs in their community before the end of the year.
Canada-wide, the number of people who expect job growth over the next six months has fallen to the lowest level since early 2009, when the Canadian economy began pulling out of the recession. Canadians have now had an overall negative impression of the job market for 12 straight months, further evidence that consumer spending in Canada is likely to slow, Mr. Crawford said.
In the United States, where expectations about employment were more mixed (there was also a slight increase in the number of Americans who were optimistic about finding a job), the volatile equity markets appear to be one of consumers' main concerns. The fall-back in equity prices beginning in April 2012 roughly coincides with the consistent declines in confidence since March, Ms. Asaf said.
The Canadian survey shows personal finances are another big source of anxiety. About one fifth of Canadians said their finances are in worse shape in June compared to earlier in the year and more people expect their situation to deteriorate in the near future. This comes as Canadians' personal debt-to-income ratio hit a record high earlier this month.