January 15, 2024
Consumers believe inflation has fallen, but their expectations for inflation in the near term are showing little progress in returning to pre-pandemic levels. Slow progress may be due to persistently high inflation expectations for services such as rent. In addition, consumers increasingly think domestic factors, such as high government spending, are supporting high inflation, and they believe these factors will take longer to resolve than global factors. Consumers have adjusted their behaviour in response to prolonged high inflation—more people are paying attention to inflation and changing their spending habits. However, actions that may support inflation, such as seeking wage increases to offset it, are dissipating. The negative effects of high interest rates are broadening, and indicators of household financial stress are deteriorating. Consumers remain uncertain about the economic outlook, and this uncertainty is weighing on their spending plans. Workers think the labour market has weakened slightly. However, expectations for wage growth remain high, supported by cost-of-living adjustments in some workers’ wage contracts.
