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Canadian Survey of Consumer Expectations—Second Quarter of 2023

Results of the second-quarter survey | Vol. 4.2 | June 30, 2023

This survey took place between May 8 and May 15, 2023. Follow-up interviews took place from May 23 to May 31.


  • Inflation expectations for one to two years ahead have come down again but remain well above their levels from before the COVID‑19 pandemic. Consumers expect the growth of some goods prices to slow as supply chain pressures ease.
  • Some people continue to think the high cost of housing and heightened government spending are important factors keeping inflation above target. The increasing cost of living is the most pressing concern for consumers. Along with elevated interest rates, it continues to constrain most households’ spending.
  • Homeowners who are planning to renew their mortgage over the next two years and who expect a significant hike in their mortgage payments are likely to plan spending cuts. In contrast, many low-income households are already buying only necessities, leaving little room for further cuts to their spending.
  • Despite concerns about the cost of living and mortgage renewal, some households are starting to think the worst is behind them. Although half of respondents still expect a recession in the coming year, consumers’ confidence about the future of the economy has improved as their inflation expectations have lowered.
  • Consumers also think that within the next 12 months interest rates will drop from where they were during the survey period. They expect this drop in rates will lessen the constraints people have been facing when accessing credit in a high interest rate environment. Coupled with strong immigration, which boosts housing demand, the expectation for lower interest rates is leading consumers to believe that prices in the housing market will increase over the next year.
  • Workers remain confident about their own employment situation. The perceived likelihood of losing a job has fallen back to pre-pandemic levels. In addition, some workers report that their workloads are heavier than this time last year. Expectations for wage growth remain near survey highs.

Near-term inflation expectations continue to ease but remain high

Expectations for inflation one and two years ahead have fallen again but remain elevated and above the Bank of Canada’s inflation-control target range (Chart 1). This holds true even when consumers who give inconsistent answers to different inflation questions are excluded.1 Consumers expect inflation to cool—in a follow-up interview, one said, “Inflation is slowing; it is levelling off.”

Chart 1: Short-term inflation expectations are elevated but moving toward more typical levels

Expectations for the growth of prices of some goods, such as food, gasoline and cars, have eased from their peak. This may reflect the fact that fewer people now think supply chain issues are the main cause of high inflation (Chart 2). Consumers also reported noticing more frequent promotional sales, particularly for groceries, after seeing very few in recent quarters.

Chart 2: Fewer consumers see supply chain disruptions as keeping inflation high

Despite growth expectations easing for some goods, consumers continue to report feeling the pain of high prices across a broad range of goods and services. These include high prices for groceries, entertainment and meals in restaurants. In addition, expectations for growth in housing costs over the next year remain near survey highs (Chart 3). One respondent commented, “Rental prices are going up and up and up.”

Chart 3: Expectations for growth in rental prices remain high

Canadians expect a slow return to typical, pre-pandemic rates of inflation (Chart 1). Many think domestic factors—including tight labour markets and elevated government spending—are keeping inflation high.

Most consumers view inflation as currently very high, at greater than 5% (Chart 4, panel a). They anticipate a sluggish return to more normal levels of inflation, suggesting that they expect high inflation will persist.2

Long-term expectations remain within the inflation-control target range. Consumer expectations for inflation in five years are somewhat below their average, with a significant share of respondents still anticipating deflation (Chart 4, panel d).3 Consumers also expect volatility in the prices of some items, such as gasoline, and this is adding to the uncertainty about where inflation will be in the long term. One consumer said, “There is a sense that the prices of some items have started to increase again after falling, and this process may spread more widely.”

Chart 4: Most people still perceive inflation to be very high

Chart 4: Most people still perceive inflation to be very high

Perceptions about current inflation: What do you think the rate of inflation (deflation) was over the last 12 months?
Inflation expectations for each horizon: What do you expect the rate of inflation (deflation) to be? (Distribution of responses)

Consumers think the impacts from high inflation and recent interest rate hikes are fading

The most pressing concern survey respondents reported is the impact of the elevated cost of living—especially the high prices for groceries (Chart 5). Some people worry that inflation has eroded the value of their pension funds. Others report having reached a limit in what they can do in response to the high cost of living; one said, “There is nothing else we can do to reduce spending.”

Chart 5: The cost of living is by far consumers’ biggest concern

Many people are also concerned about the value of their financial assets. In follow-up interviews, some respondents, particularly those in wealthy households, reported that these concerns stem from the impacts of higher interest rates and uncertainty about economic growth. One respondent said, “Because of higher rates, the stock market has really come down and the amount in my RRSPs is also going down.”

Elevated interest rates also weigh on consumer finances, and the impacts are more acute for homeowners who have variable-rate mortgages. “Interest rates on our variable-rate mortgage went from 2.6% to 6%,” one respondent said. “This is a huge increase. We are not able to go out to restaurants anymore or go on vacations because we need to be able to pay for our mortgage.” Homeowners who are planning to renew their mortgage over the next two years and who expect a significant hike in their payments are more likely than others to reduce their spending (Box 1).

Box 1: Mortgage holders’ finances may worsen after mortgage renewal

Elevated interest rates continue to impact many consumers, but mortgage holders could face additional financial stress once they renew their mortgage.

When asked to think about mortgage payments after renewal, most mortgage holders said they expect their payments to increase (Chart 1-A). Those renewing within the next two years expect a larger increase in their payments than those renewing later.

Chart 1-A: Most mortgage holders expect their payments to increase at renewal

Most mortgage holders are confident they will be able to make these higher payments, though doing so will further constrain their discretionary spending. This confidence may be linked to increasing income. Those who recently renewed their mortgage or are expecting to renew within the next two years reported higher income growth in the past year than other survey respondents. They are also more likely than other people to be looking for new or additional work. At the same time, they are acting to lessen the impacts of renewal—most are cutting spending and repaying their principal more quickly (Chart 1-B).

Homeowners expecting their mortgage payments to increase significantly are more likely to hold back spending, either ahead of or following renewal. They may also choose to reduce savings or extend their mortgage amortization period. In contrast, those expecting smaller increases in payments are more likely to absorb the shock and take no action.

When asked what mortgage type they expect to choose when they renew, mortgage holders closer to renewal said they are more likely to choose a short-term fixed-rate plan, while those further from renewal are more likely to choose a longer-term fixed-rate plan. These results are consistent with consumer expectations that interest rates will fall over the next 12 months.

Chart 1-B: Most mortgage holders are planning to cut spending and accelerate principal payments to deal with higher mortgage payments

Consumers still express a lot of uncertainty around economic growth in Canada. Half of those surveyed expect a recession in the next 12 months. For many survey respondents, the anticipation of a recession is linked to their expectations for high inflation in the coming year.4

Despite the impacts of higher interest rates and inflation, the view that Canada is heading for a recession is somewhat less widespread than it was last quarter (Chart 6). One respondent said that they “feel the economy will gradually increase” and that they “don’t think we will go into a recession.” Further, some consumers seem to sense the worst is behind them (Chart 7). Compared with the recent past, fewer people:

  • anticipate that high inflation will negatively impact their spending
  • say this is not a good time to make a major purchase
  • expect credit conditions to tighten in the next 12 months

These findings suggest that, for a growing share of Canadians, the outlook is beginning to improve.

Chart 6: Fewer consumers than last quarter think a recession is likely

Chart 7: Consumers’ outlook is becoming less pessimistic

This sense of improvement is most evident in consumers’ expectations for the housing market. House price expectations have increased from lows in the second half of 2022 (Chart 8). Survey results also show that the shares of respondents who are likely to move, sell their home or buy a new one are at or above their historical averages (Chart 9). This positive outlook may be linked to a decline in interest rate expectations. Strong demand for housing from immigrants is likely also playing a role (Box 2).

Chart 8: House price expectations are beginning to rise

Chart 9: Housing market churn remains high

Box 2: For many newcomers, purchasing a home is a top priority

Most newcomers (non-permanent residents and those who arrived in Canada in the past five years) rent a home in their first years in the country. But many are planning to purchase a home. Compared with other potential homebuyers, newcomers are less likely to be looking for a detached home, and their expected purchase date is further in the future, regardless of their age. Despite a large difference in home ownership rates between immigrants on arrival and people born in Canada, the gap closes quickly. Shares of home ownership are similar among both immigrants who have been in Canada for roughly 10 years and people born in Canada (Chart 2-A).

Chart 2-A: A large share of immigrants own a home 10 years after their arrival

Newcomers are more likely to have a lower household income than other people and therefore have to save a greater portion of their income to be able to enter the housing market. Indeed, newcomers are more likely than others to work multiple jobs. They are also more likely to save more for a major purchase, such as a home, over the next year compared with today (Chart 2-B). And, regardless of age, newcomers have weaker expected growth in spending relative to expected growth in their income.

Recent immigrants show higher rates of changing both their job and their housing than other survey respondents. Measures of housing turnover are strongly linked to changing jobs, particularly among newcomers. However, workers who recently immigrated to Canada rarely report the need to relocate as a reason for changing their job. Thus, it seems that for recent immigrants, high job churn is the reason for high housing churn, not the other way around.

Chart 2-B: Newcomers to Canada are planning to save more over the next year than they save today

Consumers remain positive about jobs

Workers still feel confident about the labour market. The likelihood of voluntary job change remains high, while that of losing a job has fallen closer to pre-pandemic levels. All respondents in follow-up interviews said the labour market is still in very good shape. The perception of a healthy labour market following several interest rate hikes may be another reason why consumers are less pessimistic about the economic outlook this quarter than in the previous quarter.

In addition, workers are noticing an increase in their workloads. About 4 in 10 find their workload has grown compared with this time in 2022 (Chart 10). The most common reason respondents mentioned for a bigger workload was having more responsibilities, which may be interpreted as natural career progression. However, the next most frequently cited reasons were a short-staffed workplace and stronger demand for a firm’s products and services. These reasons suggest that some workplaces may need additional labour to meet demand. Increasing workloads may be partly explained by respondents working more hours now, on net, compared with last year. Yet even those working fewer hours have a larger workload (Chart 11). While increasing workloads may signal labour shortages—a symptom of a tight labour market—they may also point to efforts by employers to cut costs by downsizing staff or deliberately not hiring despite facing greater demand.

Chart 10: Consumers report larger workloads compared with last year

Chart 10: Consumers report larger workloads compared with last year

Compared with this this time last year, would you say your workload has increased, decreased or stayed the same? What factors do you believe contributed to the increase in your workload over the past year?

Chart 11: Those working fewer hours also report higher workloads

Expectations for wage growth continue to rise for public sector workers, and they are still high—though easing somewhat—for those in the private sector (Chart 12). These near-survey-high expectations likely reflect labour churn that is still elevated because job changing is a source of upward wage pressure. Some workers are seeking additional income to manage the impacts of higher interest rates and the rising cost of living. However, the share of those holding multiple jobs remains below its historical average. People with a variable-rate mortgage are more likely than others to seek additional income by changing jobs or working more hours (Chart 13).

Chart 12: Across sectors, wage growth expectations remain near survey highs

Chart 13: Holders of variable-rate mortgages are more likely than others to seek additional sources of income

  1. 1. Consistent consumers are those who provide consistent responses to different questions about inflation expectations. Research shows these consumers provide a more accurate forecast of inflation than consumers who provide inconsistent responses. See S. Miller and P. Sabourin, “What Consistent Responses on Future Inflation by Consumers Can Reveal,” Bank of Canada Staff Discussion Paper No. 2023-7 (March 2023).[]
  2. 2. Consumers’ perceptions about current inflation play a prominent role in their assessment of future inflation. See N. Rai and P. Sabourin, “Why Consumers Disagree about Future Inflation,” Bank of Canada Staff Discussion Paper No. 2023-11 (June 2023).[]
  3. 3. Many of those who expect deflation in the long term believe that consumer prices will decrease as the economy recovers from temporary shocks. For more details, see Bank of Canada, “Box 1: More people than before the pandemic expect deflation in five years,” Canadian Survey of Consumer Expectations—Fourth Quarter of 2022 (January 2023).[]
  4. 4. This anticipation reflects a belief among consumers that high inflation and a recession are both negative outcomes and that they go hand in hand. See Rai and Sabourin (2023).[]

The Canadian Survey of Consumer Expectations gathers respondents’ views on inflation, the labour market and household finances. Additional information on the survey and its content is available on the Bank of Canada website. The survey report summarizes opinions expressed by the respondents and does not necessarily reflect the views of the Bank of Canada.

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