OTTAWA - Economic pessimism is on the rise in both Canada and the United States.
With the recovery flattening, stock markets jittery and uncertainty about the global economy mounting, consumers in both countries are exhibiting growing unease that may further exacerbate problems.
The surveys both sides of the border shows a sharp drop-off in sentiment about the economy and employment prospects. The Conference Board of Canada’s consumer confidence index slid 5.7 points, while the U.S. Conference Board index tumbled 9.8 points.
Canadian Conference Board economist Todd Crawford said one encouraging aspect is that the pessimism north of the border appears to be centred in Ontario and British Columbia, suggesting residents there are most worried about the implementation of the harmonized sales tax.
But there's no doubt consumers are increasingly worry that the future doesn't look as bright as it did a few months ago before the sovereign debt fears began to emerge in Europe, first in Greece and then in other Mediterranean economies.
The fears are not simply perception. On Monday, Nobel laureate economist Paul Krugman suggested that the recovery is too fragile to withstand the kind of fiscal belt-tightening contemplated by governments in Europe, and to a less extent Canada and the U.S.
If the G20 prescription for sustained global growth going forward was intended to calm market nervousness, it hasn't so far. Global markets barely reacted on Monday, and soured on Tuesday.
The Toronto Stock Exchange slid 343 points, or about three per cent, oil fell, and the Canadian dollar fell 1.78 cents to 94.76 cents US.
Analysts said the markets were reacting to negative data out of Japan and fears that China's economic rebound might not be as strong as many expected.
Late Monday, the U.S. Conference Board said a calculation error led it to incorrectly state its economic leading indicator for China for the month of April at 1.7 per cent, when it fact it should have gauged future economic growth up only 0.3 per cent.
Strong growth from China has so far helped the global economy start to dig itself out of a severe recession, and Chinese demand for oil and minerals has been particularly beneficial to exporters in Canada.
"The market is on to something," said Avery Shenfeld, chief economist at CIBC World Markets.
"I don't think we have all the evidence yet (of a sharp downturn in growth), but I think everybody smells it coming."
Because reporting on economic data lags by several months, evidence that the economic recovery is slowing remains spotty. Housing is down in both the U.S. and Canada, although Canada's numbers were in elevated and according to the Bank of Canada, unsustainable territory.
As well, Statistics Canada and other economic watchers have recently reported sharp drop-offs in the growth of auto sales and exports, along with lower employment growth, as well as outright declines in wholesale and retail sales.
CIBC has downgraded it's expectations for Canadian gross domestic product growth in April, which will be released Wednesday, to zero, from 0.2 per cent two weeks ago. The consensus is 0.1 per cent, significantly below the 0.6 per cent advance experienced in March, and the 0.5 per cent of February.
April's expected low growth has a sunny side. Some is attributable to March's unusually warm weather, which likely pushed forward some spending in clothing, or construction, adding to both March's stellar GDP jump and April's anticipated swoon.
But the consensus view of economists and markets is that the recovery, only months from the recession, is already losing some of its steam and will continue slow as government's move from stimulus to deficit fighting.
"It reflects the fact that at least for the United States, a lot of the demand was inflated by the fiscal stimulus and now we're seeing demand pull back to a much softer underlying trend," said Sal Guatieri of BMO Capital Markets.
"I don't think there's as much to worry in Canada (unless) the U.S. falls back into recession," he added.
The Conference Board's Crawford says some of the pessimism in Canada may stem simply from consumers being bombarded with bad news of the weak U.S. recovery and the crisis in Europe.
The Conference Board said the survey found many people were concerned about job security.
As well, for the second straight month the share of Canadians who said they believed now was a good time to make a major purchase fell, marking the first time in six months the balance of opinion on this question tilted toward the negative.
- Labrador retriever fetches top U.S. dog breed honor for record 28th year7 Pictures
- Oscars 2019: Red carpet looks and full list of winners36 Pictures