Canadian Survey of Consumer Expectations—First Quarter of 2025

Results of the first-quarter survey | Vol. 6.1 | April 7, 2025

The Canadian Survey of Consumer Expectations was conducted through an online panel from January 29 to February 19, 2025. Follow-up phone interviews took place from February 20 to 25, 2025. This period was characterized by pervasive uncertainty created by the sudden and unpredictable shifts in US trade policy.

Overview

• Overall, results of the first-quarter 2025 survey show that the escalating trade conflict with the United States is damaging consumer sentiment.
• Confidence in the labour market has weakened sharply. This is because many consumers—notably those working in sectors that are highly dependent on trade—are worried about losing their job. In this context, consumers have also become more pessimistic about their financial health.
• Although consumption plans had been improving over several quarters, consumers now intend to spend more cautiously given the uncertainty around the trade conflict. In addition, elevated housing costs and the high prices of many goods and services continued to weigh on households’ spending plans.
• Consumers expect the trade conflict to lead to a higher cost of living. This is reflected in their short-term inflation expectations, which rose in the first quarter of 2025.

The US trade conflict is weighing on consumer sentiment

Compared with last quarter, consumers reported a much higher chance of losing their job (Chart 1). Together with little change in the reported probabilities of voluntarily leaving a job or of finding a job, this suggests that consumer confidence in the labour market weakened sharply this quarter.

Concerns about job security have increased since last quarter because of the trade conflict. This is especially true for those working in sectors that are highly dependent on trade between Canada and the United States (Chart 2). In follow-up interviews, many consumers said they worry about how tariffs would impact their job. One person employed by a construction company said, “Because of tariffs, we can’t rely on the US for raw materials. The company I work for has gone on a break until they can figure out where else to source their materials from.” Another person said, “My job might be at risk due to tariffs because I work in logistics warehousing.”

Survey results show that consumers’ expectations for wage growth declined this quarter. This decline was broad-based across public and private sector workers. Consumers indicated that cost-of-living adjustments remain the most important factor driving wage growth expectations, but this quarter, overall economic conditions became an increasingly important downward driver.

Consumers have also become more pessimistic about their financial health (Chart 3, black line), largely because they expect their finances to worsen over the next 12 months (Chart 3, yellow bars). This greater pessimism is consistent with growing concerns about job security and a recession. Indeed, the share of consumers anticipating a recession in the coming year increased significantly (67% this quarter compared with 47% last quarter). In addition, consumers again reported a higher-than-average probability of missing a debt payment (Chart 3, orange bars).

In follow-up interviews, many consumers expressed concern about economy-wide challenges resulting from the trade conflict. One person said, “I think the impact of tariffs on the Canadian economy is going to be bad. I think there’s going to be job losses and major inflation, possibly a huge recession.” However, some interviewees said they hope that movements to diversify Canada’s economy and the Buy Canadian sentiment resulting from the trade conflict could lead to long-term benefits for the country.

Survey results also show that this quarter more consumers had negative views about access to credit, and many expect little change in interest rates over the next 12 months. This contrasts with results from last quarter, when consumers anticipated further interest rate cuts. The share of mortgage holders planning to reduce spending to manage higher payments when their mortgage renews increased slightly, after several quarters of decline.

Increased uncertainty and growing consumer cautiousness weigh on spending decisions

Last quarter, consumers reported stronger spending plans. This quarter, however, consumers showed signs of cautiousness about their spending decisions in the context of growing pessimism about their job security and financial health. For example, for the first time since the first half of 2024, there was an increase in the share of consumers who said they are reducing or planning to reduce their overall spending in light of their expectations for inflation and interest rates (Chart 4). This is in line with consumers expecting higher inflation than they did last quarter and no further interest rate cuts. Similarly, consumers no longer expect their spending to increase faster than prices do. In follow-up interviews, one person said, “I’m definitely spending less and saving more because the future is so uncertain. I like to be ahead of what might happen in the economy—for example, my job security might get worse.”

A larger share of consumers this quarter reported that economic uncertainty is holding back their purchase decisions. Other factors also continued to weigh heavily on consumer spending—in particular, elevated housing costs and the high prices of many goods and services (Chart 5).

Consumers who said they expect their jobs to be negatively affected by the trade conflict tended to report weaker spending plans for discretionary items than other consumers (Chart 6).

Chart 6: Job security concerns due to the trade conflict are causing consumers to expect to reduce their discretionary spending

The trade conflict is changing not only how much consumers plan to spend, but also what they plan to buy. In response to trade tensions, more than half of consumers reported they are spending less on goods from the United States and more on goods made in Canada (Chart 7).

In follow-up interviews, many consumers expressed a desire to prioritize Canadian goods, either to support the Canadian economy or as a protest against the actions of the US administration. For example, one respondent said, “I don’t agree with the tariffs, and I hope they’re abolished. But in the meantime, I think the best we can do is support Canadian products and just try and fuel the Canadian economy as much as possible.” However, the extent of this movement is unclear and remains to be seen. Indeed, while some interviewees were willing to pay a bit more for Canadian goods, others said their cost of living is too high for them to afford the higher prices of local goods.

Consumers also reported somewhat weaker home-buying intentions than a quarter ago. The decline was more pronounced among respondents expecting a recession.

Consumers expect inflation to increase in the context of the trade conflict

Survey results show that consumers expect the trade conflict to lead to a higher cost of living (Chart 8). In this context, consumers’ short-term inflation expectations rose this quarter for the first time since 2022 (Chart 9, blue and yellow lines). But perceptions of current inflation were unchanged from a quarter ago (Chart 9, black line). Expectations for inflation five years from now have also risen slightly but remain around their pre‑pandemic levels (Chart 9, green line).

In addition, consumers reported that they view tariffs and the Can$/US$ exchange rate as the most important factors hindering the Bank’s ability to control inflation (Chart 10). In follow-up interviews, many respondents linked rising inflation to tariffs. One person said, “I feel like inflation is going to get worse. I've already seen prices increase, but I feel like with the looming tariffs, prices are going to go up even more.” Another said, “Tariffs are going to impact us for sure, the end consumers, because obviously the price increases would have to be passed on to us in every sense, be it automotive, or everyday grocery bills, or anything.”

However, most consumers said they expect the inflationary impact of tariffs to last less than five years. This is a shorter duration than the impact of other key inflationary pressures consumers identified, such as domestic government spending and housing costs.