TORONTO (Reuters) - Consumer confidence dropped to its lowest level in nearly seven years in May, as concerns about future finances intensified amid record high gas prices, the Conference Board of Canada said on Monday.
The board’s index of consumer confidence fell 7 points in May to 85.8, according to the monthly survey based on 2,000 telephone interviews.
“Up until May we had begun to see Canadian consumer confidence buckle a bit, but it slid hard in May and I have no doubt for a minute that the driving force was the spike in gasoline prices,” said Doug Porter, deputy chief economist at BMO Capital Markets.
The Conference Board said the last time consumer confidence took such a beating was in the fall of 2005 when gas prices soared after Hurricane Katrina.
Growing demand from developing countries helped U.S. light, sweet crude futures hit an all-time high of $135.09 on May 22, ramping up inflation and growth concerns globally.
“I think compounding the weakness in confidence has just been the steady drumbeat of negative headlines in recent weeks, whether it’s the potential for soaring food prices or weakness in the U.S. economy, or layoffs in the auto sector,” said Porter.
Every region in Canada saw waning levels of confidence, with the largest declines in Central and Eastern Canada.
In Ontario and Quebec, which make up the country’s manufacturing heartland and have been hit hardest by the stronger Canadian dollar and U.S. economic slowdown, the index plunged 9.6 and 6.6 points respectively.
The index fell 9.1 points in the Atlantic provinces, 3.5 percent in British Columbia, and 3.2 percent in the resource-rich Prairie provinces.
Much of the deterioration in consumer sentiment concerned families’ future financial positions.
Asked if their families would be better off financially six months from now, 26.1 percent of respondents thought they would be, down from 30.5 percent in April. About 17.1 percent thought they would be worse off, up from 12.9 percent a month earlier.
Only 17.3 percent felt there would be more jobs in their community in six months, down from 19 percent. Those betting there would be fewer jobs in six months climbed to 26.7 percent, from 22.4 percent in April.
Just 38.2 percent believed it was a good time to buy a big-ticket item such as a house or a car, down from 45.8 percent a month earlier. That compares to 48.8 percent who think it’s a bad time for a major purchase, up from 42.8 percent.
The survey was conducted between May 1 and May 7.
Reporting by John McCrank; Editing by Bernadette Baum