Overview of Consumer Sentiment#
The Bank of Canada recently released its first-quarter 2026 consumer survey, revealing that many households anticipate the ongoing war in the Middle East will negatively affect the economy and lead to higher prices. The survey was conducted prior to the outbreak of the conflict, with follow-up interviews taking place shortly after.
Spending Plans and Economic Concerns#
Before the war began, Canadian consumers were already cautious about their spending due to high prices and economic uncertainty. However, there was a slight improvement in sentiment compared to the previous quarter, as trade tensions appeared to ease. The Canadian Survey of Consumer Expectations indicator showed a small increase, indicating a bit more optimism among consumers. Many are now opting for Canadian-made goods and local vacations, reducing their spending on U.S. products and travel.
Job Market Perceptions#
Despite some positive shifts in consumer sentiment, concerns about job security remain high. The perceived likelihood of job loss has increased slightly and is still above levels seen before trade tensions escalated. This worry is particularly pronounced among workers in sectors where jobs may be more easily replaced by artificial intelligence.
Impact of the War on Inflation Expectations#
Before the conflict, inflation expectations were stable but above historical averages, with rising food prices being a significant concern. A special survey conducted after the war's outbreak found that a majority of households expect the conflict to harm the Canadian economy and drive inflation higher. Notably, 21% of respondents reported canceling or postponing trips due to increased travel costs, while 28% have reduced or delayed major expenditures. If the war continues, consumers anticipate significant increases in gasoline and food prices over the next year.