Consumers remain apprehensive about high prices and economic instability resulting from the U.S. trade dispute, despite some positive trends, as per a Bank of Canada study released on Monday. Participants in the central bank’s quarterly Survey of Consumer Expectations expressed concerns about a higher probability of missing debt payments, job loss, and continued inflation due to tariffs.
These worries influenced their spending intentions, with respondents citing high prices, economic uncertainty, and increased housing expenses as deterrents to spending. More individuals believed their financial situation had worsened compared to the previous quarter.
While some optimism was noted, with respondents feeling more optimistic about job prospects and long-term inflation expectations decreasing below pre-pandemic levels, overall consumer expectations dipped in the fourth quarter. This decline marked a significant difference from pre-pandemic levels and was lower than before the commencement of the U.S. trade conflict last year.
According to Claire Fan, a senior economist at RBC, the divergence between sentiment data and actual economic data has widened over the past year. Respondents generally felt that the worst effects of the trade war had passed, with some uncertainties remaining about future trade relations with the U.S., including the status of tariffs and the Canada-U.S.-Mexico trade agreement.
A substantial portion of respondents felt that Canada had averted the most severe repercussions of trade tensions with the U.S., though concerns about the labor market’s weakness persisted, particularly among workers in trade-sensitive sectors.
Despite headline inflation stabilization, rising food and shelter costs continued to impact overall inflation figures. Grocery inflation surged to 3.5% in 2025, up from 2.2% in 2024, as reported by Statistics Canada. Consumers are likely to feel the impact of price hikes more acutely at grocery stores due to the regularity of the expense, according to food economist Mike von Massow. This could disproportionately affect lower-income households facing financial challenges.
Overall, consumer sentiment remains somewhat negative, with the trend in prices likely to take time to be absorbed by consumers, especially those facing economic constraints.