The Bank of Canada’s fourth-quarter consumer expectations survey reveals that despite recession concerns, 22.4% of respondents see a greater than 50% chance of moving to a new primary residence within the next year—up from 21.1% in the previous quarter.
Similarly, 13.5% of respondents plan to sell their home within the next year, up from 11.4% in Q3. The results also show increased interest from renters, with 19.9% considering a home purchase in the next 12 months, compared to 16.9% last quarter.
The Bank of Canada attributes the rise in homebuying intentions to expectations of further interest rate cuts in 2025.
“Survey results show that these home‑buying intentions are supported by consumers seeing and expecting easier credit conditions,” the report notes.
However, it also cautions that the timing of home purchases remains uncertain for many: “…those planning to buy a home over the next 12 months said they anticipate around a 50% probability of actually carrying through with those plans.”
Inflation expectations back to pre-pandemic levels
The Q4 survey revealed that inflation expectations have largely returned to historical norms.
Consumers’ inflation expectations for food and gas stayed steady in the fourth quarter, while expectations for rent eased. However, they still anticipate rent will rise faster than pre-pandemic levels.
As a result of the improving inflation outlook, consumers expressed strong intentions to increase spending on essentials and housing over the next year. For the first time since 2021, they anticipate their spending will outpace price increases.
The outlook isn’t all rosy
Despite some improvements in consumer sentiment in the fourth quarter, the survey found nearly half of Canadians (47%) still anticipate a recession in the coming year. Nearly six in 10 also expressed uncertainty over where the economy is headed.
“Survey results show that the sources of this uncertainty have shifted from interest rates and government policies to global tensions, including from the new U.S. administration,” the report noted.
While consumers are gaining confidence in their financial health and spending plans, confidence in the labour market continues to decline, particularly among young people and those with a high school diploma or less education.
Business sentiment remains subdued
The Bank of Canada’s fourth-quarter 2024 Business Outlook Survey (BOS), also released on Monday, revealed cautious optimism among businesses, with sentiment still subdued.
Conducted during the U.S. presidential election period, the survey found 40% of respondents expect negative impacts from the new U.S. administration, while a third are uncertain.
Businesses report continued soft demand due to cautious consumers, though sales expectations have improved somewhat, now slightly above the historical average.
Labour and capacity constraints have eased, with many firms opting for a “wait-and-see” approach and planning to maintain stable employment. While wage pressures are expected to ease, some businesses anticipate passing cost increases 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 side, the positive news is that investment intentions have picked up, especially in the energy sector,” TD economist Maria Solovieva wrote in a research note.
While she noted that rising expectations for future sales suggest that businesses remain on “solid footing” heading into 2025, she added “there is a sense of tense anticipation, as looming threat of tariffs runs as a common threat throughout the BOS survey.”
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Last modified: January 20, 2025