Canadians expect inflation to ease this year, but not by as much as economists are predicting. While economists forecast the inflation rate to hold below 2%, Canadians expect inflation to be 3.05% for the year ahead, the Bank of Canada’s (BoC) quarterly survey of consumer expectations released Monday.
That’s down from 4.92% consumers expected in the fourth quarter of 2023, and 3.05% in last year’s final quarter. In 2025, Canadians expect restaurant prices to go up the most (8.24%), followed by entertainment (7.24%) and rent (5.72%). Gasoline prices were expected to increase the least (4.9%) of the six categories included in the survey.
While Canadians see lower inflation ahead, 67% of respondents to a BMO investment survey published Monday indicated that inflation was already hurting their financial situation.
In the same vein, Canadians expect household spending growth (3.35%) to outpace household income growth (2.36%) over the next 12 months, the central bank’s survey found.
As inflation expectations come down, Canadians foresee a reduction in interest rates on loans and savings, according to the BoC. Respondents expect the rate to be 4.5% one year ahead from the fourth quarter of 2024, compared to 5.93% when asked the same question in the same of 2023.
Nearly half (47%) of Canadians expected a significant or small decline in the Canadian economy in the next 12 months with 17% expecting significant or strong growth, according to the BoC survey. The 2024 fourth-quarter numbers were more optimistic than the same quarter in 2023 when 61% said they expected a decline and just 11% expected growth.
Even with the rosier outlook, Canadians are increasingly concerned about their job security. Workers say there’s a 15.3% chance of losing their job in the next year compared to 10.9% last year.
The BMO survey indicated that 63% of Canadians were concerned about a potential recession in the next 12 months compared to 28% who aren’t concerned about economic decline.
“While the trade concerns are front and centre for many Canadians and should be taken seriously, global economic growth is expected to continue and we expect underlying Canadian economic growth to improve in 2025, barring serious and sustained tariff action,” Robert Kavcic, senior economist with BMO Capital Markets, said in a release.
The BoC’s survey was a nationally representative, online survey of a rotating panel of about 2,000 heads of households, administered by a large polling firm every February, May, August and November in English and French.
Pollara conducted the online BMO survey with 1,500 Canadians aged 18 years and above from Nov. 8 to 18, 2024.