Bank of Canada releases latest sentiment polling results
Canadian financial sentiment continues to fall deeper into pessimism amid rising interest rates, according to polling conducted by the central bank.
The Q4 2022 edition of the Bank of Canada’s Survey of Consumer Expectations found that on the whole, Canadians are expecting inflation to remain high for the foreseeable future. More than half of respondents (52%) expressed doubts that their earnings would be able to catch up to the likely increased costs of living in the long term.
“Expectations for wage growth are weak compared with expectations for inflation,” the central bank said. “This suggests that consumers expect wage gains will not be sufficient for them to afford rising prices. People associate the lack of wage growth with a weakening economy.”
A growing share of Canadians said that in response to mounting inflation and interest rates, they are planning to reduce their spending (63.91%) or to postpone their purchases (50.04%).
“Most often, consumers are curbing spending on discretionary items, such as recreational services, to be able to pay for necessities,” the BoC survey found. “They may also delay or cancel larger purchases.”
How are Canadian businesses feeling towards their economic and financial prospects?
The Q4 edition of the central bank’s Business Outlook Survey found that business sentiment has continued to weaken.
“As a result of rising interest rates, firms’ sales expectations and investment plans are softening,” the BoC said. “Capacity pressures have moderated from elevated levels. In this context, firms expect a slower pace of price increases.”
At the same time, while most businesses polled are expecting a recession within the next 12 months, “the majority of those firms think it will be mild,” the central bank added. “Still, some businesses are tightening budgets or pausing expansions. A few firms think a recession will ease supply chain challenges, labour shortages and cost pressures. Most businesses see the causes of a recession being interest rate increases and high prices reducing households’ capacity to spend.”
