Consumers are still feeling uneasy about elevated prices and economic instability stemming from the U.S. trade conflict, despite some positive signs, as per a recent Bank of Canada survey. The survey participants expressed concerns about a higher likelihood of missing debt payments, potential job loss, and ongoing inflation pressures fueled by tariffs.
These worries impacted their spending intentions, with respondents citing high prices, economic uncertainty, and increased housing expenses as obstacles to spending. More participants noted a decline in their financial situations compared to the previous quarter.
On a positive note, respondents were more optimistic about job prospects and long-term inflation expectations. However, overall consumer expectations decreased in the fourth quarter and remain below pre-pandemic levels, especially in comparison to pre-trade conflict levels with the U.S.
According to Claire Fan, a senior economist at RBC, there is a significant gap between consumer sentiment and actual economic data, which has widened over the past year. Despite concerns, respondents believe the worst effects of the trade war have passed, acknowledging Canada’s relative economic stability compared to initial projections.
While job growth has slowed recently and the unemployment rate has ticked up, the labor market has shown resilience. Respondents, particularly those in trade-exposed sectors, still view the labor market as weak. Nearly half of the survey participants feel that Canada has managed to avoid the worst impacts of trade tensions with the U.S. Looking ahead, uncertainties remain regarding trade relations with the U.S., including issues related to tariffs and trade agreements.
In terms of the cost of living, consumer Brad Berg highlighted the continuous rise in prices, especially for groceries and shelter, leading to adjustments in his spending habits. Grocery inflation surged to 3.5% in 2025, up from 2.2% in 2024, as reported by StatsCan. This increase in grocery prices has a more pronounced impact on consumers due to its regularity and visibility compared to other expenses.
Economists like Mike von Massow emphasize that consumers tend to feel price hikes more acutely, particularly at the grocery store, influencing overall economic sentiment. Fan also noted that rising expenses could disproportionately affect lower-income households. Despite these challenges, there are indications of a more positive trend emerging, although it may take time for consumers to adjust to changing economic conditions.
