Canadians still worried about economy, remain cautious about spending

Consumers are still feeling anxious over high prices and economic uncertainty from the U.S. trade conflict, even as several indicators improve, according to a Bank of Canada survey published Monday.

Those surveyed by the central bank for its quarterly Survey of Consumer Expectations perceived a higher likelihood of missing debt payments and a greater chance of losing their jobs. They also expect inflation to stay elevated in the near-term, citing tariffs as a primary driver.

Those worries weighed on their spending plans, with respondents pointing to high prices, economic uncertainty and higher housing costs as barriers to spending. When compared to the previous quarter, more respondents believed their financial situation had deteriorated.

There were optimistic expectations, too. Those surveyed believed they had a better chance of finding a job — or voluntarily leaving a job — this quarter compared to last. Meanwhile, their long-term outlook for inflation eased below pre-pandemic levels.

Yet overall, consumer expectations declined in the fourth quarter and are still well below their pre-pandemic levels — and are lower relative to where they were before the trade conflict with the U.S. began last year.

“This sort of growing divergence between what we call ‘soft’ data versus ‘hard’ data — which is perceived sentiment data versus what the actual economic data is telling us — has been widening pretty much throughout the course of last year,” said Claire Fan, a senior economist at RBC.

Worst of trade war has passed, say respondents

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

While job growth slowed last month and the unemployment rate ticked back up, labour data had largely bounced back in the fall; the country avoided a technical recession in November; and inflation has stayed within the Bank of Canada’s target window.

However, most respondents to the central bank’s survey see the labour market as weak, a feeling that was especially present among workers who were in trade-exposed sectors.

Notably, nearly 50 per cent of survey respondents said Canada had avoided the most serious effects of trade tensions with the U.S. Another 10 per cent believed the worst has already passed, and 28 per cent felt the worst hadn’t happened yet.

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That marks a turnaround from the Bank of Canada’s previous quarterly survey, when the majority of respondents — about a third — felt the most serious effects of the trade war ” target=”_blank”were still to come.

The sentiment that…