Overview
- Consumers plan to increase their spending significantly but remain cautious because of the Delta variant.
- Canadians think inflation will be higher in the near term due to supply disruptions, but they do not expect this situation to last. Inflation expectations remain well anchored.
- People are more willing to change jobs amid increased confidence in the labour market. However, visible minorities, Indigenous people and people with disabilities are much more likely than other Canadians to report concerns about losing their job.
- Since the pandemic, Canadians attach more value to a job with suitable hours. Many respondents also indicated that they would like to work in a different industry.
- Canadians are not expecting significant wage gains despite recent improvements in the labour market and perceptions of higher inflation.
Consumers plan to increase their spending significantly, although concerns about COVID‑19 linger
Consumer expectations for spending growth continue to be strong, driven by two main factors (Chart 1):
- More people feel comfortable resuming regular activities. Roughly three-quarters of respondents indicated that they are willing to participate in at least a modest level of in-person activity, such as attending small gatherings. In fact, some of these respondents think that events with large groups are safe or even that no restrictions are needed. This is an increase from less than half in the previous quarter, which likely reflects most Canadians being fully vaccinated by the time of the survey and lower infection and hospitalization rates across most of the country.
- Pent-up demand for some goods and services remains after long periods of restrictions. This is likely supported by extra savings. More than 40 percent of respondents reported saving more than usual during the pandemic, often because they reduced their spending. Respondents who accumulated savings intend to spend about one-third of these funds by the end of 2022—in fact, they reported having already spent about 10 percent of their extra savings in 2021.
Still, some cautiousness about COVID‑19 and resuming social activities remains, suggesting an incomplete recovery in some areas of the economy. While many Canadians reported wanting to spend more on activities such as going out to restaurants and travelling once they and others have been vaccinated, this number is lower than in the second quarter (Chart 2). The softening likely reflects consumers’ concerns about the Delta variant.
The gap between consumers’ expected spending growth and expected income growth remains wide. While an unusually high stock of savings accumulated during the pandemic can help explain the difference, the gap could also suggest that some households plan to increase their borrowing.
Chart 1: Household income and spending expectations
Chart 2: Expected spending growth on high-contact services has slowed
| 2021Q2 | 2021Q3 | |
|---|---|---|
| Education | 0.5 | -2.83 |
| Durables (cars, appliances, furniture) | 4.48 | -1.05 |
| Clothing, footwear | 13.73 | 6.23 |
| Health and personal care | 12.98 | 7.98 |
| Travel and transportation | 21.53 | 10.7 |
| Groceries | 6.59 | 11.3 |
| Shelter | 12.88 | 11.71 |
| Restaurants, cinemas, social activities | 26.88 | 15.63 |
Consumers expect inflation to be temporarily higher
Short-term inflation expectations have adjusted to the recent rise in inflation, but consumers think this increase in inflation will be temporary (Chart 3).3, 4, 5 Most respondents anticipate that, in the medium term, inflation will stay within or just above the Bank of Canada’s inflation-control target range of 1 to 3 percent (though the share reporting this declined somewhat). This is consistent with medium-term inflation expectations remaining well anchored.
Follow-up interviews with respondents suggest that the uptick in short-term expectations is linked to the ongoing impact of the pandemic, including supply constraints.6 Expectations for inflation one year from now rose to a survey high—for the first time exceeding expectations at longer horizons. Medium-term expectations have increased only modestly, and long-term expectations are unchanged. Consumers expect inflation to slow with the end of the pandemic. They anticipate that supply issues will be temporary, and they are confident that as constraints ease, inflation will subside.
Most consumers reported that their cost of living has gone up since the start of the pandemic. They noted significant price increases for food, gasoline and major purchases such as cars and houses.
Chart 3: Inflation expectations
Canadians feel more confident about the labour market
Although weaker than before the pandemic, consumer expectations for labour market conditions have improved. The reported likelihood of voluntarily leaving a job increased to pre-pandemic levels (Chart 4). This suggests that some people are more willing to change jobs now that the economy has reopened and vaccination rates have increased. It could also reflect pent-up demand for changing jobs. That is, some workers may have delayed looking for a different job while labour markets were weak earlier in the pandemic and when people were more concerned about the virus.
More respondents than before the pandemic would like to change jobs to obtain suitable hours (e.g., more hours, fewer hours or regular hours), and some would like to move to a different industry (Box 1). High job turnover tends to be associated with improved labour market conditions, and Canadians’ expectations for finding a job are now near pre-pandemic levels.
Canadians’ expectations for losing their job remain somewhat higher than they were before the crisis. And while perceptions of the labour market are improving, vulnerabilities remain, notably among visible minorities, Indigenous people and people with disabilities (Box 2). Respondents from Alberta also continue to express higher probabilities of losing their job than other Canadians.
Chart 4: Labour turnover
Box 1: The pandemic may have changed what Canadians are looking for in a job
Many respondents said they would like to switch jobs for higher compensation, greater career opportunities and better hours. Survey results indicate that a suitable work schedule has become more important than it was before the pandemic. A greater number of people now look for a job with a regular work schedule or fewer required hours. This may reflect the negative impact that working during the pandemic has had on many Canadians. For instance, workers in trade, transportation and warehousing may feel pressure from the surge in online shopping during the pandemic. However, some would prefer to work more hours, which suggests some slack in the labour market.
Many Canadians indicated that they would like to work in a different industry. About one-third of job seekers said they would like to change industries (Chart 1‑A). Compared with employed people, a larger share of unemployed people—about 50 percent—reported wanting to change industries. This could be because the unemployed have a weaker attachment to a specific field. Workers in industries that pay lower wages or that have been hard hit by the pandemic, such as recreation and culture, are more likely to move to another industry. Older workers (aged 55 and over) are less likely to report wanting to switch industries; this is consistent with the lower job mobility of this group.
Box 2: People in vulnerable groups report higher likelihood of losing their job
Survey results for the third quarter include additional detail on different demographic groups. This is helping the Bank of Canada better understand the health of the labour market for all Canadians. For example, respondents who are visible minorities, Indigenous people or people with disabilities recorded a relatively high chance of leaving or losing their job in the next year (Chart 2‑A). Indigenous people reported that they have a greater than 50 percent chance of leaving their job, and visible minorities reported a roughly 35 percent chance. The Canadian average is roughly 20 percent. These differences likely reflect more precarious working conditions, as these groups also reported higher chances of losing their job. Indigenous people, people with disabilities and visible minorities reported a 31 to 48 percent chance of losing their job, compared with the Canadian average of about 10 percent.
Canadians continue to expect moderate wage increases
Consumer expectations for wage growth remain moderate (Chart 5). This suggests that perceptions of higher inflation along with the tighter labour market have not led to expectations for higher wage growth for workers staying in their current job. Despite stability at the aggregate level, expectations for wage growth vary among different demographic groups. Expectations for higher wages increased to a survey high among those with a lower level of education. This may be supported by strong job gains for that group over the summer as restrictions eased. In contrast, expectations for higher wages declined modestly among people with a higher level of education. Perceptions of wage growth over the past 12 months declined to 1.2 percent, below the survey’s historical average.
Reasons cited by respondents for their moderate expectations for wage growth include:
- wage growth already set in collective agreements
- weak bargaining power
- high uncertainty about labour market conditions
- the greater importance of better work-life balance
Chart 5: Wage growth expectations
Endnotes
- 1. The Canadian Survey of Consumer Expectations gathers respondents’ views on inflation, the labour market and household finances. The survey for the third quarter of 2021 was conducted from August 13 to August 28, 2021. Additional information on the survey and its content is available on the Bank of Canada website. The survey report summarizes opinions expressed by the respondents and does not necessarily reflect the views of the Bank of Canada.[←]
- 2. To deepen the Bank’s analysis, this survey provides results on a broader range of demographics, specifically on visible minorities, Indigenous people and people with disabilities.[←]
- 3. 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.[←]
- 4. 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. 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 (May 2021).[←]
- 5. 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 to better understand aggregate inflation pressures.[←]
- 6. The market research firm Nielsen conducted follow-up telephone interviews with respondents and collected responses on behalf of the Bank of Canada.[←]