The Bank of Canada’s fourth-quarter consumer expectations survey showed that despite recession concerns, 22.4% of respondents still believe that the likelihood of moving to a new primary residence next year is more than 50%, up from 21.1% in the previous quarter.
Likewise, 13.5% of respondents plan to sell their home within the next year, up from 11.4% in the third quarter. The results also showed increased interest from renters, with 19.9% considering buying a home in the next 12 months, compared with 16.9% last quarter.
The Bank of Canada attributed the rise in home purchase intentions to expectations of further interest rate cuts in 2025.
“The survey results show that these home purchase intentions are supported by consumers seeing and expecting easier credit conditions,” the report states.
However, it also warned that the timing of home buying remains uncertain for many people: “…those planning to buy a home in the next 12 months said they expected the chance of actually following through on those plans to be about 50 per cent. “
Inflation expected to return to pre-pandemic levels
Fourth-quarter surveys show that inflation expectations have basically returned to historical normal levels.
Consumer inflation expectations for food and gas remained stable in the fourth quarter, while expectations for rents eased. However, they still expect rents to rise faster than pre-pandemic levels.
Consumers have expressed a strong desire to increase spending on necessities and housing next year as the outlook for inflation improves. For the first time since 2021, they expect their spending to exceed price increases.
The outlook is not optimistic
Although consumer confidence improved in the fourth quarter, the survey found that nearly half of Canadians (47 per cent) still expect a recession in the coming year. Nearly six in 10 also expressed uncertainty about the direction of the economy.
“The findings suggest that sources of uncertainty have shifted from interest rates and government policies to global tensions, including from the new U.S. administration,” the report states.
While consumers are increasingly confident about their financial health and spending plans, confidence in the labor market continues to decline, especially among young people and those with a high school degree or less.
Business sentiment remains subdued
The Bank of Canada’s fourth-quarter 2024 Business Outlook Survey (BOS) released on Monday showed businesses are cautiously optimistic and sentiment remains subdued.
The survey, conducted during the U.S. presidential election, found that 40% of respondents expected the new U.S. administration to have a negative impact, while a third were unsure.
Businesses reported that demand continues to be weak as consumers are cautious, but sales expectations have improved and are now slightly above historical averages.
Labor and production capacity restrictions have been eased, and many companies have chosen to “wait and see” and plan to maintain stable employment. While wage pressures are expected to ease, some businesses expect cost increases to be passed on to consumers. As a result, 20% of respondents now expect inflation to exceed 3% over the next two years, up from 15% last quarter.
“On the business front, the positive news is that investment intentions have picked up, particularly in the energy sector,” TD economist Maria Solovieva wrote in a research note.
While she noted that rising expectations for future sales suggest businesses remain on “solid footing” heading into 2025, she added that “there is a sense of nervousness as the threat of looming tariffs is a concern throughout the BOS survey.” a common threat.
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Last modified: January 20, 2025
