VANCOUVER - Canadian retailers are slashing prices and making special offers to stimulate shoppers feeling less flush thanks to spiralling stock markets, falling house prices and higher borrowing costs.

The pressure increased this week as the stock market wiped away years of gains and at least one bank hiked some of its consumer lending rates by one percentage point, or about $150 a month on a home loan of about $300,000.

Fears are also being fuelled by predictions from Canadian economists that the economic gloom could deepen into something worse than a recession, pushing up the unemployment rate and eroding consumer confidence.

"As a result of all of this, I expect the consumer to slow down his love affair with the shopping mall," said Adrian Mastracci, portfolio manager at KCM Wealth Management in Vancouver.

"It's normal at this point in the (business) cycle to have people cutting back, but at the same time, people who have a few dollars to spend can get some good deals. Retailers are hurting. They want to sell something. They won't give it away, but will definitely shave prices."

The deals now being offered are normally saved for the crucial Christmas holiday shopping season, when people tend to spend the most money.

For instance, Roots Canada is now offering a $30 discount for every $100 spent at its stores across the country, while Sears Canada (TSX:SCC) has rolled out "Budget Relief Price Drops" on hundreds of items ranging from clothing to appliances. Wal-Mart Canada started cutting prices last week on everything from toys to electronics.

Dan Putler, chair of the marketing division at the University of British Columbia's Sauder School of Business, said many of the discounts we now see in stores are aimed at getting rid of fall inventory, which was ordered earlier this year when the economic picture was rosier.

Retailers are also trying to raise revenues at time when loans to buy future stock are more restrictive. Putler said a regular 60-day payment cycle has been reduced in some cases to 30 days, as wholesalers move to protect their own finances and demand quicker payment of their accounts.

"All of this combined just means that people are going to carry less inventory, do less hiring and do a number of things along those lines," Putler said.

Peter Woolford, vice-president of policy and research at the Retail Council of Canada, said retailers will do "whatever is required to attract the customer, persuade them to buy the merchandise and give them value for their hard-earned money."

"That is always the case, but never moreso than when consumers are nervous and concerned," said Woolford.