By Ketki Saxena
Investing.com -- The Bank of Canada released two key surveys earlier today: its Business Outlook Survey (BOS), reflecting business confidence, and on the consumer side, Bank of Canada's Survey of Consumer Expectations (CSCE).
The Survey of Consumer Expectations for the third quarter of 2022 showed that consumers' inflation expectations continued to rise. The 1-year and 2-year expectations increased to 7.1% and 5.2%. Five-year ahead inflation expectations edged lower to 3.4%.
Expectations about wage growth increased only among private sector workers. As inflation marches ahead of wage growth, nearly 50% of Canadian consumers were by cutting back on spending, reducing discretionary spending, and adjusting their shopping habits.
Ksenia Bushmeneva, TD (TSX:TD) Economist notes “Consumers were generally less optimistic, with high inflation, tighter credit conditions, and deteriorating household finances hitting confidence.”
Going ahead, increasing household debt, inflation and the decline in housing values - a “trifecta of headwinds”- is expected to result in a “Significant slowdown in consumer spending next year as households tighten their purse strings.”
“An average household with debt is projected to spend $1600 more on debt payments next year relative to 2022.”.
Today’s survey also suggests that Canadians are losing faith in the Bank of Canada’s ability to tackle inflation: over three quarters knew that the aim of the BoC interest rate increases, but only 40.5% believed the rate hikes increases would tame inflation. Nearly 78% of Canadian consumers see 50% or higher odds of a recession in the next 12 months.