Results of the Fourth-Quarter Survey | Vol. 0.4 | January 13, 2020
The Canadian Survey of Consumer Expectations (CSCE) focuses on respondents’ views on inflation, the labour market and household finances. The survey for the fourth quarter of 2019 was conducted between November 11 and November 29, 2019. This is the first quarterly publication of the results of the CSCE, whose data collection began in the fourth quarter of 2014.
- Consumers’ expectations for one-year-ahead and five-year-ahead inflation declined slightly in the fourth quarter of 2019, while two-year-ahead expectations were roughly unchanged since early 2018.
- Views on the labour market were relatively similar to those in the third quarter, with consumers’ expectations for their wage growth remaining largely stable. Other indicators continue to send mixed signals about the state of the labour market.
- Overall, consumers’ expectations for growth of household income were largely stable in the fourth quarter of 2019. At the same time, their expectations for spending growth increased.
- Consumers’ expectations for house price growth went up somewhat in Canada overall. Expectations for house price growth increased in British Columbia, though they remained below the highs reached in 2018. Expected growth in house prices remained weak in Alberta and Saskatchewan.
In the fourth quarter of 2019, consumers’ expectations for one-year-ahead inflation ticked down slightly, from 2.4 to 2.2 percent (Chart 1).1, 2 Expected inflation in five years from now also declined. Expectations for two-year-ahead inflation remained stable. These expectations were well below the peak reached in mid-2018. Perceptions about inflation over the past 12 months remained unchanged. Most of the respondents expect inflation to be within the Bank of Canada’s inflation-control range or close to it (Chart 2).
Chart 2: Inflation expectations: distribution
Note: This chart presents shares of respondents with inflation expectations and perceptions in each range. Survey questions are presented in the Overview.
Consumers’ expectations for wage growth over the next year were largely the same as those in the previous survey, with an expected wage gain near 2.0 percent (Chart 3). These expectations remained somewhat below inflation expectations, as well as below rates expected in the first half of 2018. Other indicators continue to send mixed signals about the state of the labour market. On the one hand, the likelihood of voluntary job departure increased in the fourth quarter of 2019 and is at a survey high (Chart 4). This suggests an improved view of prospective labour market conditions, since it may reflect that respondents have greater confidence they can find a better job. On the other hand, their reported probability of losing their job went up and is also at a survey high. This probability increased strongly throughout 2018. Respondents’ reported probability of finding a job if they lost their main job was unchanged in the quarter. Overall, consumers’ expectations did not reveal a meaningful change in views of labour market conditions relative to the previous quarter.
Household finance, credit and house prices
As with their expectations for wage growth, consumers’ expectations about growth in household income were largely stable in the fourth quarter of 2019 and were below the peak observed in the first half of 2018 (Chart 5). Expectations for spending growth edged up in 2019 and continued to surpass expectations for income growth, suggesting that consumers may reduce saving or increase debt. Consumers lowered their expectations for interest rates, mostly at the two-year horizon (Chart 6). Consumers’ expectations for house price growth edged up in the fourth quarter in Canada overall (Chart 7). These expectations increased in British Columbia, though they remained below the highs reached in 2018. Expected growth in house prices remained weak in Alberta and Saskatchewan.
Chart 5: Household income and spending expectations
* Household income refers to total income from all sources before taxes and deductions.
Note: This chart presents median values. For an explanation of the computation, see the Overview. The Overview also includes the survey questions.Last observation:
- We focus on median expectations rather than the average to avoid potential skewness driven by extreme values. For details on the computation of median inflation expectations and other data presented in this report, refer to the Overview. [←]
- As in other countries, in Canada household inflation expectations tend to be somewhat higher than observed inflation. This suggests that it is more informative to focus on changes over time rather than levels. For more details see M.‑A. Gosselin and M. Khan, “A Survey of Consumer Expectations for Canada,” Bank of Canada Review (Autumn 2015): 14–23; and “Survey of Consumer Expectations,” Center for Microeconomic Data, Federal Reserve Bank of New York (December 2019). [←]