Overview
The Bank of Canada released its consumer expectations survey for the first quarter of 2026, reporting that households see the outbreak of war in the Middle East as likely to both dampen economic activity and raise prices. The main survey was carried out from February 5 to February 25, before the conflict began, with additional phone follow-up interviews conducted between February 24 and March 2. A targeted, special survey addressing the war’s effects took place from March 26 to April 2.
Spending and price worries before the conflict
Prior to the onset of hostilities, consumer spending plans remained subdued. Households cited elevated prices and broader economic uncertainty as the primary constraints on near-term spending. Despite these concerns, consumers were somewhat less negative than in the previous quarter, a shift the Bank attributed in part to easing trade tensions.
The report notes that the Canadian Survey of Consumer Expectations indicator inched up from recent lows, and that actions by the United States on trade had a diminishing effect on Canadian consumer sentiment. Across respondents, the high cost of living persisted as a dominant issue. In response, many households reported substituting toward goods made in Canada and choosing domestic vacations while cutting back on purchases of US-made goods and travel to the United States.
Labour market perceptions and job-loss risk
Consumers continued to view the labour market as relatively soft, with elevated fears about job security. The perceived probability of losing one’s job rose marginally during the quarter and remains higher than levels recorded prior to the earlier period of trade tensions. The survey highlights a particular rise in job-loss concerns among workers in occupations where more than one-fifth of employees are in roles whose tasks may be more replaceable by artificial intelligence.
Inflation expectations
Near-term inflation expectations, as measured before the war, were largely unchanged from the prior quarter and continued to sit above the survey’s historical average. Expectations for strong food price inflation are singled out as an important factor driving elevated one-year-ahead inflation forecasts. By contrast, longer-term inflation expectations edged down slightly compared with the same point 12 months earlier.
Findings from the post-outbreak special survey
The special survey conducted after hostilities began found a strong majority of households anticipating that the conflict would harm the Canadian economy and contribute to higher inflation. The responses show tangible behavioural effects: 21% of respondents reported cancelling or postponing trips, mainly because of increased travel costs, while 28% said they had deferred or reduced major purchases more broadly. When asked to look ahead, consumers said that if the war persists they expect pronounced increases in gasoline and food prices over the next 12 months.
Data limitations: The primary survey dates and follow-up periods are those specified above; the special survey was conducted March 26 to April 2. Where the report indicates shifts or expectations, it reflects respondents’ views as captured in those surveys.