Tuesday, November 8, 2011

Christmas spending may drop due to economic fears

Feelings of financial insecurity could overwhelm the Christmas giving spirit, making Canadians less likely to splurge on holiday shopping this season, according to a survey released Tuesday by Deloitte Canada.

With a growing number of respondents pessimistic about the economy and more people choosing to pay down their debts, holiday budgets could be squeezed.

Only 29 per cent of Canadians surveyed said they expect the economy to improve in the coming year, while 33 per cent thought it will decline, the report found.

Last year, nearly half — 49 per cent — of Canadians were optimistic about the economy for the coming year and 15 per cent had a negative outlook.

"The uncertain global economy and the resulting volatility of the stock market, the Canadian dollar, and fuel prices have taken their toll on Canadians' confidence," said Jean-Philippe Vorsanger, a retail consultant with Deloitte Canada.

"Survey respondents told us that their highest priority is to pay off debt, although debt to income ratios continue to rise across the country and are now much higher than those of Americans who have focused on paying down their debt in the past couple of years," Vorsanger said.

Top government officials have been warning Canadians about piling on too much debt during this low interest rate climate because it could become too burdensome to pay back when interest rates inevitably rise. Still, debt-to-income ratios — the amount Canadians owe compared to how much they earn — have risen to an all-time high. more