Fewer businesses and consumers expect a recession this quarter, as inflation expectations remain pessimistic: Bank of Canada surveys
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Fewer consumers and businesses are expecting a recession compared to last quarter, according to two surveys released by the Bank of Canada on Friday.
Fewer consumers and businesses are expecting a recession compared to last quarter, according to two surveys released by the Bank of Canada on Friday.
One third of firms are preparing for a recession compared to one half at the beginning of the year, and 50 per cent of consumers are now expecting a recession compared to 58 per cent at the beginning of 2023.
Consumers in particular think the worst is behind them and have a better outlook on the future of the economy, with the expectation that interest rates will drop 12 months from now.
In the short-term, the cost of living remains the number one key issue for consumers. The cost of groceries remains a concern and the value of financial assets, such as pension funds, has seen a decline.
Variable rate mortgage holders are feeling the most impact from elevated interest rates and are more likely to cut back on spending.
“Interest on our variable-rate mortgage went from 2.6 per cent to 6 per cent,” one respondent from the Canadian Survey of Consumer Expectations said. “This is a huge increase. We are not able to go to restaurants anymore or go on vacations because we need to be able to pay our mortgage.”
Businesses are increasingly concerned about slowing demand, with one fifth of them now expecting an outright decline in sales. This is particularly felt by firms who rely on consumer discretionary spending which has been hit by higher interest rates.
