Consumers continue to express concerns about high prices and economic instability stemming from the ongoing U.S. trade conflict, despite some positive signs, as revealed by a recent Bank of Canada survey. Participants in the central bank’s quarterly Survey of Consumer Expectations expressed heightened worries about potential difficulties in meeting debt obligations and job security. They anticipate persistent inflation in the short term, largely attributing it to tariffs.
These apprehensions had a dampening effect on their spending intentions, with respondents identifying high prices, economic uncertainty, and increased housing expenses as obstacles to consumption. More respondents felt a deterioration in their financial circumstances compared to the previous quarter.
While there were some optimistic outlooks, such as improved job prospects and a moderated long-term inflation outlook, overall consumer expectations decreased in the fourth quarter, remaining significantly below pre-pandemic levels and even lower than before the trade conflict with the U.S. commenced.
Claire Fan, an RBC senior economist, noted the widening gap between consumer sentiment and actual economic data throughout the past year. Despite concerns, the Canadian economy has shown resilience beyond earlier projections, with job growth stabilizing, the economy avoiding a technical recession in November, and inflation staying within the Bank of Canada’s target range.
Most survey respondents view the labor market as weak, particularly those in trade-exposed sectors. Nearly half believe Canada has sidestepped the worst impacts of trade tensions with the U.S., while a portion feels the worst is over, although uncertainties linger around trade relationships and agreements like the CUSMA.
A notable concern among consumers is the rising cost of living, notably in food and shelter expenses. Grocery prices surged by 3.5% on average in 2025, a notable increase from the previous year, as per a recent StatsCan report. Experts suggest that consumers feel the impact of price hikes more keenly on everyday expenses like groceries, while noting that adjustments to lower or stable prices may take time to be recognized.
Both economists and experts emphasize the challenges faced by lower-income households in coping with escalating costs, underscoring the significance of these trends on consumer sentiment and financial well-being.