TORONTO — Economic observers say Canadian consumers will likely feel the pain of economic turmoil in the United States if it heads back into recession as some credit agencies fear.

John Stephenson of First Asset Funds says U.S. debt downgrades and plunging stock market values could translate into tougher times ahead for Canadian consumers.

He says a faltering U.S. economy will likely mean Canadian businesses won't be in much of a mood to hire, while consumers may lack the confidence to spend enough to keep the economy growing.

Stephenson says consumers should be concerned about reduced investment income, especially at a time when Canadians have racked up debt at cheaper borrowing rates.

Bank of Montreal economist Robert Kavic says the Canadian dollar is vulnerable and the Toronto stock market will probably keep taking a beating for some time.

He says that could affect consumer confidence and spending levels, which could undermine prices in the influential housing market, especially in Vancouver and Toronto.