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Confidence drops sharply in August

 21 August 2011      

TORONTO (19 August 2011) - Recent turmoil in the stock markets severely shook Canadians and prompted a significant drop in the Canadian Consumer Confidence Index published monthly by TNS Canada, a private market and social research based here. After a slight drop in July, the index fell two full points in August, from 99.7 to 97.6, wiping out whatever optimism Canadians showed in the economy during the period leading up to the federal election in May.

"Canadians have clearly been spooked by last week's ups and downs in the stock market." TNS vice president Norman Baillie-David said in a statement. "Even in the summer months, when you don't think people are paying much attention to the news or stock markets, these gyrations (in the markets) are having a significant impact on Canadians' view of the economy, as well as their own prospects."

Some 1,015 nationally representative Canadian adults were interviewed by telephone for this month's survey between August 8 and 12. For a survey sample this size, the margin of error is plus or minus 3.1%, 19 times out of 20.

The Present Situation Index, which measures how people feel about the economy right now, dropped a full point - from 100.3 to 99.0. TNS suggests this shows the fear being seen in the markets isn't being felt by Canadians at large right now.

However, their apprehension is being seen in the Expectations Index, which measures people's outlook for the economy six months from now. This index plummeted almost six points - from 105.4 to 99.6 - reaching its lowest point since July 2009.

"All of a sudden, those market fluctuations we saw last week are having an important ripple effect. For the first time in a long time, the uncertainty in the markets is causing Canadians to feel their future prospects will be turning towards the worse. Unfortunately when it comes to consumer confidence, the fear is that pessimism often turns out to be a self-fulfilling prophecy" Baillie-David observed.

The Buy Index, measuring the extent to which Canadians believe now is a good item to purchase big ticket items such as a car or a major household appliance, moved slightly from 93.3 to 93.7, which TNS interpreted as no change in statistical terms.

"This is likely the combination of statistical margin of error, combined with a feeling among some Canadians that they may be better off making that purchase now, before they believe things actually get worse," Baillie-David said.

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