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," Mr. 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.
Meanwhile, Deloitte notes its consumer confidence index has dropped to 75 from 89 last year — though Canadians are still more optimistic than shoppers south of the border, where the confidence index hovers around 45.
Half of Canadians said they will stick to a budget, with the median being around $477. Those earning less than $30,000 reported a median budget of $264 while those households with an income greater than $150,000 reported a median budget of $816.
"As a result, retailers should anticipate low, single-digit growth over the holiday shopping season," Mr. Vorsanger said.
By region, shoppers in the Vancouver area are less optimistic about the economy, with two-thirds of consumers saying they felt the economy would stay the same or improve, compared to 80 per cent a year ago.
Those in Prairie province cities such as Edmonton, Calgary and Winnipeg, where unemployment is lower than the Canadian average were more positive than elsewhere, with about three-quarter responding they expect the economy to improve or stay the same.
In Montreal, the economic outlook is worse than last year with 60 per cent of consumers feeling positive compared to 89 per cent last year.
Meanwhile, those in Atlantic Canadians said they will spend more than the average Canadian this year during the holiday season, though 42 per cent said they felt the economy would remain the same over the next year.