And businesses are losing confidence amid inflation concerns
Canadians have an increasingly negative view of the economy, and most are expecting recession according to the latest data from the Bank of Canada.
In its Canadian Survey of Consumer Expectations for the third quarter of 2022, the bank found that consumers are anticipating inflation to continue rising for the next 1-2 years, although there is variation in what they believe is the cause.
Although most accept that external factors including supply chain issues and oil prices are key reasons for prices rising, there is a split on domestic influences with some blaming increased government spending and others citing price gouging by Canadian retailers.
The strength of the labour market is noted by respondents with few worrying about losing their job, but most workers said their wages are lagging inflation and do not expect them to catch up.
Consumers’ confidence is weaker than normal for expected real wages, credit conditions and household finances. Most believe that the chance of a recession in Canada is 50% or more.
Reducing spending and making different purchasing choices are among the methods that most respondents are making to mitigate higher prices.
Business confidence
Meanwhile, the Bank of Canada’s third-quarter 2022 Business Outlook Survey reveals that inflation remains a key concern while pressure on prices do appear to be easing.
With prices of commodities and other input goods showing some downward pressure, respondents expect their own price hikes to moderate.
However, many businesses, especially those related to housing activity and household consumption, are expecting weaker sales growth due to rising interest rates.
Although confidence is under pressure, there is optimism that sales growth will be healthy overall, despite a slower pace.
Business investment is likely to be scaled back and focus on technology and automation as firms aim to boost productivity.
