Change theme
Change theme

Canadian Survey of Consumer Expectations—Third Quarter of 2023

Results of the third-quarter survey | Vol. 4.3 | October 16, 2023

This survey took place between August 4 and 16, 2023. Follow-up interviews took place from September 5 to 11.


  • Consumers’ perceptions of current inflation remain elevated and are leading to persistently high expectations for inflation over the next 12 months. The gap between perceptions of inflation and actual inflation is unusually wide. This is likely because many consumers form their views based on their own shopping experience. Households with a large gap expect high price growth for essentials like food and housing.
  • Consumers’ expectations for interest rates one year from now also remain high. Many people think increases in interest rates are raising the cost of living and keeping inflation high.
  • The growing cost of living remains the most pressing concern for consumers. High inflation and rising interest rates have had a negative financial impact on most households and are causing more households than last quarter to reduce spending.
  • Many consumers believe the impacts of higher interest rates on their household spending are far from done. Those expecting more adverse effects ahead are less likely to plan major purchases. Overall, consumers reported that they are more likely to spend on discretionary items like vacations and concerts than buy items usually financed with loans, such as cars or appliances.
  • Despite having a worsening outlook on the economy, workers still see the labour market as healthy. They also continued to report a higher-than-normal likelihood of voluntarily leaving their job, and their expectations for wage growth are now at a survey high. However, consumers pointed to signs that the labour market is cooling. For example, people are spending more time than in recent quarters looking for a new job.

Near-term inflation expectations remain persistently high

Consumers continue to expect that inflation will remain high over the next 12 months, in part because they perceive that inflation is currently high (Chart 1).1 However, this perception is diverging from actual inflation (Box 1). Nevertheless, consumers still anticipate that inflation will ease in the coming years.

Chart 1: Elevated perceptions of current inflation are leading to persistently high near-term inflation expectations

Box 1: The gap between consumers’ perceptions of inflation and the official data is unusually wide

How consumers perceive the current rate of inflation shapes how they expect inflation to evolve over time. Recently, consumers’ perceptions of inflation have been unusually high compared with official data on consumer price inflation. The widening gap is particularly evident for some demographic groups, such as young consumers (respondents aged 18 to 23) (Chart 1-A).

Chart 1-A: The gap between perceived and actual inflation is particularly high for young consumers

Consumers’ everyday activities, such as shopping, affect their perceptions of current inflation.2 These experiences may be contributing to the gap between actual and perceived inflation. Survey results show that the gap is particularly wide for people whose price growth expectations are higher than others’ for items they routinely pay for or that are very visible, such as:

  • food
  • gasoline
  • rent
  • housing

Expectations for growth in these specific prices are either rising or stable at very high levels. The widespread view that these routinely seen prices are growing quickly helps explain some of the abnormally large gap between perceived and actual inflation. In follow-up interviews, respondents frequently mentioned high food inflation as the main factor influencing their perception of overall inflation. An interview respondent said, “I’m feeding a family of five and my grocery bill is through the roof. Prices seem to be still rising.”

Consumers who expect interest rates to increase also have a wider-than-usual gap between their perception of inflation and what official data show. One reason for this is that many consumers can see the effect of higher interest rates on costs such as mortgage payments. One respondent said, “Mortgage interest is inflationary.”3

In addition, the news coverage that people focus on may affect their perceptions of inflation. Consumers are more interested now in news about inflation than they were before the COVID‑19 pandemic. Interviews showed that respondents tend to focus on stories about how inflation continues to be higher than before the pandemic as opposed to stories on the easing of inflation. When asked about the economy and inflation, one respondent said, “With what I hear from my surroundings, what we hear in the media, it’s rather discouraging.”

In addition to being linked to their perception of current inflation, consumers’ expectations for inflation are also tied to economic factors. When asked what is contributing to high inflation expectations, consumers mentioned mostly domestic factors, such as:

  • government spending and tax policies
  • labour shortages
  • businesses increasing profits

During follow-up interviews, one consumer said, “Banks and the government are making life too expensive. They’re charging taxes on things like gas, and it’s causing inflation.”

Consumers are also skeptical about whether raising interest rates can lower inflation. While most consumers understand that higher interest rates are intended to reduce inflation, less than half of consumers believe they will (Chart 2). Despite consumer price index inflation having fallen from its most recent peak in June 2022, consumers’ opinions on the effectiveness of monetary policy have changed little from the average results recorded in 2022. Overall, long-term inflation expectations remain low and stable, but people disagree more than usual about whether there will be inflation or deflation in five years. As in recent quarters, more consumers than usual expect deflation in five years, largely because they believe that the high price growth of recent years will eventually reverse.

Chart 2: Most people understand that the Bank raised interest rates to reduce inflation, but less than half expect it will work

The effects of higher interest rates have broadened, and more impacts are expected

Following two increases in interest rates since the last survey, households’ expectations about interest rates have ticked up. This rise in expectations, alongside the perception that inflation is stubbornly high, is pushing households to cut spending and increase savings to take advantage of higher interest rates (Chart 3). The growing cost of living remains the most pressing concern for consumers. One respondent shared, “You don’t spend as quick as you used to. Pre-pandemic, if you wanted something, you bought it. Now, you think first if you need something before you buy it.”

Chart 3: Most people are reducing spending to guard against inflation

Higher interest rates are also making more households than last year feel financially worse off (Chart 4). This likely reflects, in part, higher current and expected interest rates. Higher interest rates impact most mortgage holders, especially those with variable-rate mortgages. In an interview, one homeowner said, “We renewed our mortgage at a higher rate. We were prepared because we saw it coming, but the monthly payments are higher so it’s eating into our discretionary spending.”

In addition, increases in interest rates are worsening the financial vulnerability of many households. Most homeowners’ mortgage payments are near or beyond the maximum level that they can manage without making significant spending cuts (Chart 5). Despite greater financial pressure, most mortgage holders still believe they can meet higher payments at renewal and think the likelihood they will default on their debt is low. This view has not changed from last quarter.

Chart 4: The impacts of higher interest rates have broadened

Chart 5: Many homeowners’ mortgage payments are close to or beyond the maximum they can afford

Higher interest rates are also continuing to cool housing demand by weighing on consumers’ likelihood of buying a home (Chart 6). Still, a large share of newcomers (non-permanent residents and those who arrived in Canada in the past five years) intend to buy their first home in the next 12 months. Owning a home is a measure of success for many newcomers. This source of housing demand, along with a reduction in the number of homeowners planning to sell their homes, may be supporting rising expectations for growth in home prices.

Chart 6: Housing market expectations eased slightly despite strong demand from newcomers

Many households think the direct impacts of past increases in interest rates on their household spending are far from over (Chart 7). The Bank of Canada’s Business Outlook Survey reports similar findings from Canadian businesses. In addition, households that expect more impacts to come are more likely to curtail their spending in response.

Higher interest rates appear to be affecting consumers’ major purchases. Most households are not planning to purchase items that are likely to be financed with a loan, particularly goods such as vehicles, appliances and home electronics (Chart 8). In addition, consumers reported lower intentions of making major purchases of goods and services in the next six months compared with the past six months. In a follow-up interview, one person said, “We’re being more cautious and not doing everything at once, but we still like travel and we’re not going to skimp on something we know we want to do.”

However, more households plan to make major purchases of services, such as vacations or concerts, in the next six months than plan to make major purchases of goods. Spending on these services appears to be motivated strongly by pent-up demand and their availability now compared with last year.

Higher interest rates are also weighing on consumer sentiment generally. The increased pessimism among consumers is evident in their expectations for the economy: 55% now expect a recession in the next year compared with 50% last quarter. Consumers typically associate high interest rates and inflation with a greater likelihood of an economic downturn over the next year.

Chart 7: Many consumers expect further impacts from higher interest rates

Chart 8: Plans for making major purchases are more widespread for services than for goods

Workers remain confident about the labour market but reported signs of cooling

Despite having a worsening outlook for the economy, workers still see the labour market as healthy. They reported higher-than-normal likelihoods of voluntarily leaving their job and being able to find new work. This suggests stronger-than-average confidence in the labour market (Chart 9).4

Chart 9: Workers remain positive about jobs but see signs of cooling in the labour market

Chart 9: Workers remain positive about jobs but see signs of cooling in the labour market

Probability of losing a job Probability of leaving a job Probability of finding a job 2023Q2 2023Q3 Historical mean Length of job search Expected growth in earnings

Note: A move toward the centre indicates weaker confidence in the labour market. Each line represents one standard deviation from the historical mean.

In addition, expectations for wage growth edged up again. Although these expectations reached a survey high, they remain below 3%. Multiple factors have driven the upward trend in wage expectations in recent quarters, including:

  • workers’ ongoing confidence in the labour market
  • more widespread plans among workers to boost their income, including by pushing for pay increases, in response to higher inflation and rising interest rates

At the same time, consumers reported some signs that the labour market may be cooling:

  • Fewer consumers than last quarter reported working more hours now than they worked 12 months ago (Chart 10). Those working fewer hours than last year often attributed the decline to slower activity at their workplace.
  • The length of time job seekers reported looking for a job is longer, by more than a week.
  • During the past 12 months, the Bank’s experimental Daily Internet Survey of Confidence—a high-frequency online survey of Canadians—found that consumers have gradually revised down their expectations for employment growth in their local area.5 Over the past two months—and for the first time since mid-2021—more consumers have been expecting a decrease in employment than have been expecting an increase.

Chart 10: The share of people who reported working more hours now than last year has decreased

  1. 1. Consumers’ perceptions of current inflation are an important driver of their inflation expectations. See N. Rai and P. Sabourin, “Why Consumers Disagree About Future Inflation,” Bank of Canada Staff Discussion Paper No. 2023-11 (June 2023).[]
  2. 2. For more, see R. Keshishbanoosy, F. Tarkhani, A. Xu, C. Yélou, P. Sabourin and O. Kostyshyna, “Consumer Price Index and Inflation Perceptions in Canada: Can measurement approaches or behavioural factors explain the gap?” Prices Analytical Series, Statistics Canada – Catalogue no. 62F0014M (January 19, 2022).[]
  3. 3. The positive link between interest rates and inflation expectations is reported in M. Jain and O. Kostyshyna, “What Do People Think About Interest Rates and Inflation?” Bank of Canada Staff Working Paper (forthcoming).[]
  4. 4. To compare across questions, the quarterly results are normalized—that is, the quarterly result minus the historical average is divided by the standard deviation. The following measures are included: expected wage growth over the next 12 months, probability of finding a job in the next 3 months, probability of leaving a job in the next 12 months, probability of losing a job in the next 12 months (negative impact on confidence) and the number of weeks looking for a job (negative impact on confidence).[]
  5. 5. The Daily Internet Survey of Confidence is a collaboration between the Bank and RIWI, a global trend-tracking and prediction technology firm. This internet-based survey aims to capture the economic sentiment of Canadian consumers. RIWI randomly selects individuals who attempt to reach inactive or abandoned websites. These individuals can choose to participate. Anonymous answers to a few questions on issues such as expectations for the labour market reveal—in real time—additional signals about the current perceptions of Canadian consumers. This complements the suite of other survey tools and data the Bank uses to make decisions about monetary policy.[]

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.

On this page
Table of contents