Canadians still worried about the economy, remain cautious about spending

Despite improvements in many indicators, consumers are still worried about higher prices and economic uncertainty from the U.S. trade conflict, according to a Bank of Canada survey published Monday.

The people whom the Central Bank surveyed for this Quarterly Survey of Consumer Expectations They were found to be more likely to miss loan payments and more likely to lose their jobs. Citing tariffs as the primary driver, he also expects inflation to remain high in the near term.

Those concerns weighed on their spending plans, with respondents pointing to higher prices, economic uncertainty and higher housing costs as barriers to spending. Compared to the previous quarter, more respondents believed their financial situation had worsened.

There were also optimistic expectations. Those surveyed believe that they have a better chance of finding a job or voluntarily leaving their job this quarter than in the previous quarter. Meanwhile, their long-term outlook for inflation slipped below pre-pandemic levels.

Yet overall, consumer expectations declined in the fourth quarter and are still well below their pre-pandemic levels – and lower than before the trade conflict with the US began last year.

“This kind of gap between what we call ‘soft’ data versus ‘hard’ data – what the perceived sentiment data is telling us versus what the actual economic data is telling us – has been widening significantly over the last year,” said Claire Fan, a senior economist at RBC.

Respondents say the worst of the trade war is over

The Canadian economy has proven more stable last year than the worst-case scenario predicted by some analysts and economists.

While job growth slowed last month and the unemployment rate rose again, labor data largely reversed the decline; The country escaped technical recession in November; And inflation remains within the Bank of Canada’s target range.

Although most respondents to the central bank survey viewed the labor market as weak, this sentiment was particularly present among workers in trade-exposed sectors.

Specifically, nearly 50 percent of survey respondents said Canada has avoided the most severe effects of trade tensions with the U.S., another 10 percent believe the worst has already passed, and 28 percent believe the worst had not yet happened.

This marks a change from the Bank of Canada’s previous quarterly survey, when a majority of respondents – nearly a third – felt the most severe impacts of the trade war. was still to come.

The notion that the worst of the trade war is over is “largely correct on a macro level,” Fan said. But many open questions remain about the future of Canada’s trade relationship with the U.S., he said.

This includes the legal status of the IEEPA tariffs and the fate of the Canada–US–Mexico trade agreement (CUSMA). “There is still a tremendous amount of fog and uncertainty around how we will think about business in the year ahead,” he said.

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“The cost of living is going up, and going up,” said Brad Berg, who spoke to CBC News outside Calgary’s North Hill Center shopping mall. Berg mentioned that he is spending less due to rising prices.

“Coffee, beef, everything is growing. You live with it. You can’t do anything else,” he said. “I buy stuff on sale, put it in the freezer. Just do what I want.”

Even though core inflation has stabilized, the cost of food and shelter continues to have an impact on the overall numbers. grocery inflation alone Increases to 3.5 percent in 2025 On an annual average basis, that compares to an average of 2.2 percent in 2024, according to a StatsCan report released Monday.

“If we dig a little deeper psychologically, we know that we react more deeply to bad news than to good news,” said Mike von Massow, a food economist at the University of Guelph.

As a result, consumers will feel the increase in prices “more clearly” at the grocery store – because it is a regular expense, and most people have an idea of ​​how much they spend on a trip – while noticing flat prices or somewhat lower prices.

“It is not surprising that consumer sentiment is still somewhat negative,” von Massow said. “It’s going to take a while for us to come to terms with the fact that the trend is at least flat and starting to go in the other direction.”

The fan also made the same observation. “Increasing those factors can be really damaging, especially to low-income families who really have no place to hide when they’re faced with these challenges,” he said.