Survey suggests modest improvement despite ongoing concerns about prices, economic uncertainty, and housing costs
Results from the Canadian Survey of Consumer Expectations for the fourth quarter of 2024 revealed a modest improvement in consumer financial health and sentiment, driven by recent interest rate cuts and optimism for further reductions. However, lingering concerns about high prices, economic uncertainty, and housing costs continue to weigh on decision-making.
Conducted between October 31 and December 3, the survey highlights a decline in the share of consumers reducing their spending. For the first time since 2021, consumers anticipate their spending will outpace price increases, the report noted. “Rates are coming down, which is good, so I am hoping they will continue to go down,” one respondent said.
While financial confidence improved, challenges remain. Renters, who often face more significant affordability issues than homeowners, reported an increased risk of missing debt payments. Mortgage holders expressed optimism, as fewer anticipate higher payments upon renewal, aligning with expectations of easier credit conditions.
Spending and home-buying intentions rise
Consumers reported stronger intentions to increase spending on essentials and housing over the next year. Discretionary spending, including on durable goods and vacations, remains low but is improving compared to previous quarters.
Anticipation of lower interest rates has also fuelled home-buying intentions. However, many prospective buyers remain uncertain, assigning only a 50% probability to following through with plans.
Despite these positive developments, nearly half of respondents foresee a potential recession in 2025. Economic uncertainty, driven by global tensions and elevated costs, continues to shape consumer behaviour.
Labour market confidence declines
The survey notes weakening confidence in the labour market, with a rise in the perceived risk of job loss. Young individuals and those with lower education levels reported more significant concerns. Additionally, job seekers spent more time searching for work compared to the previous quarter.
At the same time, more workers—particularly in low-income and private-sector roles—indicated intentions to voluntarily switch jobs for better pay. Wage growth expectations, though unchanged, remain high, with cost-of-living adjustments cited as a key driver.
Inflation expectations normalize
Consumers’ inflation expectations have returned to pre-pandemic levels. The forecast for inflation over the next 12 months aligns with historical norms, with long-term expectations matching the Bank of Canada’s targets.
However, perceptions of current inflation remain elevated, and views on future inflation remain divided. Rent inflation expectations eased but remain slightly higher than before the pandemic.
A respondent expressed cautious optimism, saying, “Inflation is not as high as during the pandemic; I think it’s stabilizing.”
The Canadian Survey of Consumer Expectations is conducted quarterly by the Bank of Canada. Detailed findings are available on the Bank’s website.
Any thoughts on this story? Let us know in the comments below.
