TORONTO - Consumer confidence has dipped to levels last reported during the depths of the recession as Canadians grapple with higher everyday costs, record debt and fears of another major downturn.

The Conference Board of Canada said Wednesday that its index of consumer confidence fell 3.3 points in October to 71.8. That is its lowest level in since May 2009 when the economy began to recover from the depths of the recession.

The index is measured against a reading of 100 in 2002 when consumers were extremely confident about the state of their finances.

The drop overshadows a slight rise last month. It was also the fifth decline in the last six months.

A survey released Wednesday by the Royal Bank of Canada also pointed to a sharp drop in consumer confidence.

Both surveys come as Canadians deal with higher prices for gasoline, food and clothing, not to mention record debt loads spurred by ultra-low interest rates, as well as stock market turmoil and signs of slowing economic growth.

"We don't view it as terribly surprising, though it is disappointing," Craig Wright, senior vice-president and chief economist at RBC, said of the drop in confidence levels.

"If you look at the economic environment of late and all the doom and gloom out there and talk of double recession and Europe default and the like, obviously consumers are picking up on that negative sentiment."

Consumers surveyed between Oct. 6 and Oct. 16 by the Conference Board showed a surprising level of optimism about future job creation, but that was not enough to buoy overall confidence.

Only 36 per cent of respondents believed now is a good time to make a major purchase -- the fewest number since early 2009, said Todd Crawford, an economist with the Conference Board.

"It's a worrisome trend for the Canadian economy because it's a good way to gauge where consumer spending is going to head over the next six to 12 months," he said.

Canadians appear to be in a "holding pattern" as they wait to see how the external factors weighing on sentiment -- debt crises in Europe and the U.S. and signs of slower growth in Asia -- play out, he said.

Consumer confidence in Ontario and B.C. -- where rapidly rising home prices are eating up a bigger portion of household income -- declined the most, by seven points or more. Meanwhile, consumers in the Prairie provinces indicated improved confidence, resulting in an index reading of 97 points.

Economists watch consumer confidence closely because consumer spending accounts for more than half of overall economic activity in Canada. However, it can be an unreliable indicator because it relies on what people say about their intentions rather than their actual behaviour.

For example, data released Tuesday showed that retail sales improved by 0.5 per cent in August even as the confidence index fell to a then two-year low.

The Bank of Canada noted that the world economy is slowing and limited its projection of Canadian growth to 2.1 per cent this year and 1.9 per cent next year.

Slower growth could put pressure on hiring as well as household finances, spelling trouble for Canadians who have taken advantage of record low interest rates to amass record levels of debt.

However, the bank said Wednesday that household spending will continue to grow, albeit more moderately than previously thought, given the hit to incomes, wealth and confidence from market turmoil.

Many Canadians may not be aware of how macroeconomic factors like European debt relate to their own finances, but consumers do understand that worldwide economic crises can take a toll on Canada's economy, said Michael Mulvey, assistant professor of marketing at the University of Ottawa.

"I don't think you have to be an economist to realize that things aren't going all that well right now and it's not going to change," he said.

In another troubling sign, the RBC report found that more than half of Canadians surveyed have no savings set aside for a rainy day and many who do dip into them to help pay for everyday expenses.

Some consumers might be relying on credit cards, rather than savings, as an emergency fund, Mulvey said.

"A lot of people have already dipped into their credit for emergencies that have already transpired and there's nothing left there to go back to the well, so I think a lot of people might be at a tipping point right now."

However, the RBC survey also suggested that Canadians are "very focused" on finding ways to manage their finances. Over the next 12 months, 33 per cent said they planned to reduce debt, 30 per cent intended to spend less, 21 per cent expected to save or invest more and 21 per cent planned to do all of the above.

RBC's confidence index, compiled between Sept. 26 and Oct. 3, was at 70 points, down 24 points from last quarter. It was a record low since the bank began tracking sentiment in late 2009.

Finance Minister Jim Flaherty and Bank of Canada governor Mark Carney have been warning for months that Canadians have been racking up more debt than they can sustain as a result of a long period of ultra-low interest rates and sluggish price inflation.

Many economists believe the Bank of Canada won't raise rates until late next year or into early 2013 because of the weak economy and downward pressures on inflation, although Carney himself refused to provide rate guidance during a news conference on Wednesday.