Consumer confidence in Canada dropped dramatically in May, according to the most recent TNS Canadian Facts' consumer confidence index released today.

The drop marked the first significant dip in Canadian consumer confidence in months, said the marketing research firm, despite mixed domestic and international news about the economy since late 2007. The firm's present situation index, a reading that evaluates the overall state of the economy and employment, stands at 109.3, down from 113.7 in April.

"Increased costs at the pump and supermarket may be the most important drivers of pessimism for Canadians in the short term as they factor in increasing risks to their disposable income," said Richard Jenkins, vice-president of TNS, in a statement.

But despite the drop in confidence, TNS said Canadians remained somewhat optimistic about the economy overall – 42 per cent, they reported, said they believe the economy is "at least fairly good."

The expectations index, an evaluation of consumer optimism, was down to 92.9 from 97.8 in April. May's reading was the lowest level of consumer confidence the firm has recorded in the past four years, they said.

"The dramatic decline in confidence is troubling given the importance of strong domestic consumer spending for the overall health of our economy.

"It's unclear, however, whether confidence will rebound as consumers adjust to higher prices or continue to slide," added Jenkins.