Canadian consumer confidence falls to 26-year low

Canadian consumer confidence fell in October to its lowest level in more than a quarter-century, according to the Conference Board of Canada's consumer confidence index released Friday.

The board conducted the survey of 2,000 Canadians from Oct. 2 to Oct. 8, during the height of the global financial crisis.

"The global credit crunch and major stock market declines clearly had an effect on consumer confidence," said Pedro Antunes, the board's director of national and provincial forecasts. "Consumers felt that they would be worse off in six months, indicating concerns that the financial crisis would not be resolved quickly."

The Conference Board's index fell 11.9 points, to 73.9, the lowest level since the third quarter of 1982 during the height of the early 1980s downturn.

A similar U.S. consumer confidence survey, from the University of Michigan, also plunged to 57.5 this month from a reading of 70.3 in September. This didn't come as a surprise to economists at BMO Capital Markets, who said in a note to clients they expected a "sizable drop" in the U.S. index given steep decreases in stock market values that, year to date, have wiped out $25-trillion of wealth.

"While this isn't as low as the 56.4 figure seen last June, which ironically was almost all related to rising gasoline prices, the parade of negative economic numbers could easily send the index below that level before year-end," Andrew Pyle, wealth advisor at ScotiaMcLeod, said in a note to clients about the U.S. consumer index.

The Conference Board said survey respondents suggested it was not a good time to make a major purchase and their view about their current and future financial situations also deteriorated. Consumers were less optimistic about future employment prospects for the fifth time in six months, and the October decline was the largest this year.

News of plummeting consumer confidence emerges amid the release of some of the grimmest economic forecasts yet. On Thursday, Bank of Nova Scotia's chief economist, Warren Jestin, warned the Canadian economy would contract in 2009, by 0.2%. Meanwhile, Sherry Cooper, chief economist at BMO Capital Markets, said Canada was headed for a recession and that Ottawa "will awaken to the need for deficit spending."

The C.D. Howe Institute's monetary policy council, made up of academics and Bay Street economist, have called on the Bank of Canada to cut its benchmark lending rate by a half percentage point on Tuesday, to 2%, in light of "severe stress" in credit markets.