By  on November 27, 2007

MONTREAL — Unburdened by the credit crunch or slow housing market in the U.S., Canadian consumer confidence is at a more than three-year peak, which bodes well for holiday shopping, a new survey said.

"With confidence overflowing, consumers are poised to open their wallets this holiday season," said Richard Jenkins, vice president of TNS Canadian Facts, an Ottawa market research firm.

Jenkins said the index of the overall state of the economy and employment levels was 122.8, up from 119.8 a month ago, the highest in the more than three years TNS has been conducting the survey. As a result, Canadians are planning to buy $986 per person in gifts and other holiday items this season, up 12 percent from the $877 average spent last year.

"With employment at record levels and the high [Canadian] dollar strengthening purchasing power, consumer optimism is translating into early good news for retailers...as long as they can head off the resurgence in cross-border shopping," Jenkins said.

That last caveat could put a damper on some retailers' holiday cheer. Data from Statistics Canada provides more evidence that the Canadian dollar's new buying power, which reached a high of $1.10 U.S. this month before settling back to around $1.02, is sending an increasing number of shoppers south — including through the Internet — and forcing Canadian retailers to cut prices to compete.

Canadians' shopping trips to the U.S. hit a six-year high in September, at 2.07 million same-day car trips, when the Canadian dollar eclipsed the greenback for the first time in 31 years, and lower domestic retail prices helped slow inflation in October, according to Statistics Canada. Overnight car travel to the U.S. also increased, climbing 4.2 percent to 930,000 trips, the highest level since December 1993. Overnight trips by air rose 1.5 percent, to 507,000.

Although some Canadian retailers have cut prices in an attempt to keep Canadians north of the U.S. border, Douglas Porter, deputy chief economist at brokerage BMO Nesbitt Burns in Toronto, calculated that Canadian prices on a basket of goods were on average 26 percent higher than U.S. prices and said Canadian retailers were slow to react.That could change, he said, resulting in "very aggressive discounting," if sales are softer than retailers expect in the weeks before Christmas.

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