Even the holiday season isn't kickstarting consumer spending, as another round of dismal numbers Thursday indicated Canadians are being cautious with their cash and an index of economic trends fell for a third straight month.

Statistics Canada said retail sales fell 0.9 per cent in October, while a Scotiabank study indicated Canadians are spending substantially less on the holidays this year.

"The reality is that we'll probably see spending remain on the back burner in the early part of 2009 as our economy goes through a significant amount of consolidation," Bank of Nova Scotia economist Aron Gampel said in an interview.

Gampel said deep discounts by retailers, along with lower gasoline prices and interest rates, are helping to stimulate spending, but not enough to offset a "sudden downdraft in expectations."

Scotiabank's survey found that individual holiday spending on gifts, travel and entertainment is expected to average $790, down by $117 or 13 per cent from a year ago. That includes a 19 per cent drop in anticipated outlay on gifts to an average of $563.

Statistics Canada said October sales declined broadly, with home furnishings, electronics, automotive, gasoline, clothing and general merchandise all down.

Gampel said the numbers indicate people are taking a more cautious approach to spending as the economic outlook darkens.

"Canadians are still going to spend; they're just going to spend less, and that's a more cautious and pragmatic approach to the changing economic conditions," Gampel said.

Statistics Canada also reported that its composite leading index fell 0.7 per cent in November, its third straight retreat - and the largest since January 1991.

The agency said the decline in the forward-looking economic indicator was dominated by a large drop in the stock and housing markets.

The contraction in consumer demand is piling pain onto the already suffering factory sector, Canadian Manufacturers and Exporters said.

Fifty-nine per cent of the companies in its survey have seen orders decline since September, and 38 per cent expect employment levels to fall in the next three months.

"The message we are hearing from manufacturers and exporters across the country is that, 'We ain't seen nothing yet,"' stated Jayson Myers, head of the industry association.

"Our members tell us that there are more production closures and job losses to come."

Also Thursday, economists at National Bank predicted the world economy won't expand more than 1.6 per cent in 2009. According to the International Monetary Fund, growth below three per cent signifies a global recession.

But National Bank said "a very accommodating monetary policy and substantial budget stimulus measures from Ottawa" will help Canada weather the downturn better than most developed countries.

It predicts Canadian gross domestic product will be flat in 2009, with unemployment jumping from its current 6.1 per cent to seven per cent, and home construction slumping by 19 per cent.

Meanwhile, the Conference Board of Canada estimated that profits in the country's auto parts industry have fallen 38 per cent this year to $1 billion, their lowest level since data on profits was first collected in 1999.

Also Thursday, federal Finance Department documents show the government expects at least four years of budget deficits even before spending a dime on stimulating the economy.

However, a Canadian Press-Harris/Decima survey indicates 54 per cent of the citizenry want Ottawa to spend within its means, rather than going into deficit in an effort to stimulate growth.

On the consumer spending front, Bank of Montreal economist Doug Porter said Canada "is still light-years away from the sharp declines underway in the U.S.," but "the slide in Canadian retail sales is expected to take on a more ominous tone in coming months, undercut by job losses, wealth destruction and sagging consumer confidence."

TD Bank economist Diana Petramala said that with consumer confidence at a 26-year low, 300,000 job losses expected over the next six months and ongoing financial turmoil, "we expect retail spending to slow to a 2.5 per cent pace in 2009, the lowest annual growth rate on record."

And RBC economist Paul Ferley said cautious consumers are one of the factors helping to drive the economy to a projected 2.5 per cent annualized decline in the current quarter, opening a recession that will continue into the first quarter of 2009.