Results of the First-Quarter Survey | Vol. 2.1 | April 12, 2021
The Canadian Survey of Consumer Expectations (CSCE) collects respondents’ views on inflation, the labour market and household finances. The survey for the first quarter of 2021 was conducted from February 15 to March 4, 2021. This period coincides with news of temporary delays in COVID‑19 vaccinations in Canada and growing risks from new variants of the virus. The survey was completed before the most recent wave of infections and lockdowns in the largest provinces. Like the previous three surveys, the 2021 first-quarter survey included questions on the impacts of the pandemic and the measures to contain its spread. This survey also asked respondents about their expected economic and social activities once the majority of Canadians have received their COVID‑19 vaccine (Box 1). Similar to the report for the fourth quarter of 2020, this report also provides some details by demographic characteristics.
Overview
- While Canadians remain concerned about COVID‑19, they have found ways to adapt to restrictions, such as changing their shopping habits and working remotely. Most respondents intend to get vaccinated, and some have already received their initial vaccine. This has led to growing optimism, as more people than in previous surveys expect that life will eventually return to normal. Respondents also expect that after vaccination, they will increase spending on a range of goods and services, especially social and recreational activities (Box 1). Nonetheless, some respondents remain deeply cautious. Seniors, in particular, are hesitant to resume economic and social activities even after they and the majority of Canadians have been vaccinated.
- Overall, inflation has not become a bigger concern for Canadians, and the pandemic has not dramatically changed consumers’ views on inflation. Consumers’ inflation expectations decreased over a one-year horizon, more than reversing the increase seen in the 2020 fourth-quarter survey results. Movements in these expectations since the onset of the pandemic may reflect fluctuations in food prices. Looking further out, inflation expectations for two years ahead remain relatively stable, while those for five years ahead have partially recovered from their 2020 declines.
- Overall, consumers’ expectations around labour market conditions have partially recovered but are weaker than they were before the pandemic. This may reflect the impact of some ongoing containment measures. Consumers’ expectations about wage growth remain muted. Indicators of labour turnover continue to be weaker than before the pandemic: job-keeping rates changed little, and job-finding rates deteriorated slightly. More positively, rates for voluntary job changing increased. This upswing in the expected pace of job changing and possible career growth could support future wage gains.
- Consumers’ expectations for spending growth rose to a survey high, while expectations for household income growth were unchanged. This anticipated pickup in spending may reflect pent-up demand for some goods and services. The gap between expectations for spending growth and expectations for income growth has never been this wide. This gap suggests that consumers could become more confident in their spending once the pandemic has ended and might spend some of their accumulated savings.
- Consumers’ expectations for house price growth edged up across the country. The results show that the pandemic has boosted demand for housing overall and is causing a shift in buyers’ preferences toward larger homes and those outside of city centres.
Inflation
Overall, inflation has not become a more pressing concern for Canadians, and the pandemic has not dramatically changed consumers’ views on inflation. Consumers’ perceptions of inflation have remained close to 2 percent while actual inflation has been weak.
Short-term expectations edged down, but long-term expectations ticked up. Consumer expectations for one-year-ahead inflation declined, more than reversing the pickup seen in the fourth quarter of 2020 (Chart 1).1, 2, 3 The dynamics in consumers’ short-term expectations since the onset of the pandemic could reflect changes in food prices.4 Despite some volatility, the average of all short-term expectations reported since the second quarter of 2020 has remained close to pre-pandemic levels. Expectations for inflation two years from now continue to be relatively stable and close to levels observed over the past two years. Expectations for inflation five years from now have partially recovered from their 2020 declines and are close to their pre-pandemic levels.
Inflation expectations remain well anchored, while uncertainty about inflation increased slightly. Most respondents anticipate that inflation will stay within or just above the Bank of Canada’s inflation-control target range of 1 to 3 percent. However, consumers’ uncertainty about their own forecasts for inflation ticked up slightly in the first quarter of 2021. It currently sits above pre-pandemic levels but below the elevated levels seen at the beginning of the pandemic (Chart 2).
Chart 1: Inflation expectations
Chart 2: Inflation expectations: uncertainty
Labour market
Overall, consumers’ expectations for labour market conditions have recovered some ground but remain weaker than before the outbreak of the virus. This may reflect expectations that some containment measures could stay in place for an extended period.
The recovery in jobs is expected to be delayed and uneven. Respondents anticipate returning to their normal work schedule in about eight months, which is three months later than they expected in the 2020 fourth-quarter survey. This may reflect lockdowns and delays in vaccine delivery in February 2021. The recovery in jobs is expected to be uneven, with youth anticipating a slower return to a normal work schedule than prime-age workers.
Consumers’ expectations for wage growth remain muted. They changed little in the quarter and remain below their pre-pandemic level at 1.9 percent. Perceptions of wage growth over the past 12 months declined to an all-time low of 1.0 percent (Chart 3).
Chart 3: Wage growth expectations
Expectations of losing a job or finding a new job remain more subdued than they were before the pandemic. Consumers’ expectations of losing their job changed little (Chart 4). Their expectations for finding a new job deteriorated for a second consecutive quarter, which could reflect the partial reclosure of the economy during the second wave of the pandemic. The reported likelihood of voluntarily leaving a job increased, though it remains weaker than before the pandemic. This suggests that concerns about the health of the labour market could be easing for some people who might be more willing to change jobs once the economy recovers. If the higher level of confidence results in more turnover in the job market, that could increase the quality of job-worker matching, leading to greater future productivity and stronger wage growth.
Chart 4: Labour turnover
Household finance, credit and house prices
Consumers expect their spending growth to pick up despite flat income growth (Chart 5). This increase in spending growth expectations to a survey high could reflect pent-up demand for some goods and services as well as improved confidence about the end of the pandemic (Box 1). The gap between expectations for spending and expectations for income has expanded to its widest point since the survey began. This suggests that households could become more confident in their spending after the pandemic has subsided and may be willing to spend some of their accumulated savings. In fact, respondents anticipate spending more than one-third of their extra savings accumulated during the pandemic over the coming two years.5 People also expect to use about 15 percent of their extra savings to pay down debt.
Consumers’ expectations for interest rates at all horizons changed little and are lower than they were before the pandemic. This decline in expectations is in line with the Bank’s policy rate cuts and forward guidance; it also supports planned household spending (Chart 6).
The pandemic has not significantly altered consumers’ ability to make debt payments. Consumers’ views on access to credit are less positive than before the pandemic, indicating tighter credit conditions. Still, most people reported being able to make debt payments on time, and only a small faction (9 percent) have requested debt payment deferral for mortgages or consumer credit. The vast majority of these requests—made because of a pandemic-related decline in household income or for precautionary reasons—were partly or fully approved.
Consistent with the strength in housing markets, consumers’ expectations for house price gains moved up (Chart 7).6 This increase since the outbreak has been widespread across the country, but expectations are more moderate in Alberta and Saskatchewan. Low mortgage rates, increased savings and pandemic-induced shifts in behaviour continue to boost demand for housing. Buyers prefer larger homes and locations outside of city centres. Roughly 10 percent of respondents (14 percent of renters and 9 percent of homeowners) plan to buy or are considering buying a house or a condominium.
Chart 5: Household income and spending expectations
Chart 6: Interest rate expectations
Chart 7: House price growth expectations
Box 1: Concerns about the virus remain, but confidence in spending is increasing
As in recent surveys, the first-quarter survey in 2021 included questions on the impact of COVID‑19 and the measures to contain its spread. This survey also added new questions about respondents’ outlook for their future behaviour after the majority of Canadians have been vaccinated.
Overall, Canadians remained prudent in the first quarter of 2021, and their views on risks and safe activities were similar to those in the previous survey. People continued to adapt to the pandemic and related public health restrictions and containment measures by changing their shopping habits and working remotely. Most respondents intend to receive (75 percent) or have already received (5 percent) a COVID‑19 vaccine.
Households expect the economic recovery to be slow and the threat of COVID-19 to diminish no earlier than in the second half of 2021. Women and households with lower incomes believe the recovery will be slower than do men and households with higher incomes, which may reflect the uneven impact of the pandemic on these groups. Some people, notably seniors, are hesitant to resume their regular activities. More than 40 percent of respondents aged 55 and over said they are likely to engage in fewer economic and social activities even after the majority of Canadians are vaccinated (Chart 1‑A). This reflects the perception of greater risks from the virus for those over 55 than for younger cohorts. Consumers anticipate their spending will return to normal in about a year.
Despite concerns about the virus, confidence around spending has increased. People expect to spend more after vaccination on a wide range of goods and services—especially on travel and social and recreational activities (Chart 1‑B). While many respondents cancelled plans for major purchases and social and recreational activities during the pandemic, some expect to resume those plans or even to do more than originally intended after the pandemic has subsided. There are more signs of pent-up demand among younger consumers than among older groups.
| Age | Resume the same level of economic and social activities as before the pandemic | Engage in fewer economic and social activities than before the pandemic | Engage in more economic activities than before the pandemic |
|---|---|---|---|
| 18–24 years | 46.13 | 17.35 | 36.51 |
| 25–54 years | 47.77 | 25.83 | 26.39 |
| 55+ years | 45.43 | 42.99 | 11.56 |
Endnotes
- 1. We focus on median expectations rather than the average to avoid potential skewness driven by extreme values. For details on the computation of median inflation expectations and other data presented in this report, refer to the Overview.[←]
- 2. As in other countries, in Canada household inflation expectations tend to be somewhat higher than observed inflation. This suggests that it is more informative to focus on changes over time rather than levels at specific points in time. For more details see M.‑A. Gosselin and M. Khan, “A Survey of Consumer Expectations for Canada,” Bank of Canada Review (Autumn 2015): 14–23; and “Survey of Consumer Expectations,” Center for Microeconomic Data, Federal Reserve Bank of New York (February 2021).[←]
- 3. Inflation expectations can differ by demographic group (age, level of education and income). This also suggests that it is more informative to look at changes over time rather than levels at specific points in time.[←]
- 4. Due to pandemic-related supply disruptions (e.g., meat plant shutdowns), stockpiling and unstable weather, food prices increased sharply in the second quarter of 2020 before gradually easing.[←]
- 5. With reduced spending and fewer recreational and social activities, some consumers—mostly those with higher incomes—reported saving more than usual.[←]
- 6. Among the factors that have contributed to strong house prices over the past 15 years, the supply of houses and population growth were ranked by Canadians as the two most important, followed by foreign buyers and credit conditions.[←]