Bank of Canada survey shows consumer inflation expectations rise as trade tensions weigh on spending

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Canada inflation expectations rise

Highlights

The August 2026 Bank of Canada survey shows consumers' long-term inflation expectations rising to match already elevated short-term views, driven by higher tariffs and energy costs.
Despite gains in financial asset values and modest labour market improvement, Canadian household spending plans deteriorate due to high prices and ongoing economic uncertainty.
Labour market confidence improves among workers exposed to U.S. trade but worsens in sectors threatened by artificial intelligence, reflecting divergent pressures from trade and technology.

Survey timing captures impact of trade talks breakdown

As reported by Bank of Canada, citing statistics, the Canadian Survey of Consumer Expectations is conducted online from August 5 to 27, 2026, with about three-quarters of responses gathered before Canada-U.S. trade talks break down on August 21 and the announcement of new Canadian counter-tariffs. Follow-up phone interviews take place from August 24 to September 4, 2026, giving the central bank a direct comparison of views before and after the breakdown in negotiations.

Consumers’ inflation expectations at all horizons move higher after the talks collapse. Near-term expectations for inflation over the next 12 and 24 months are little changed overall, but they remain above historical averages and above levels seen before trade tensions begin. Long-term inflation expectations rise this quarter to match already elevated shorter-term expectations.

Respondents continue to identify tariffs, trade tensions and energy prices as the main drivers of inflation. In follow-up interviews, many consumers describe tariffs as increasing the cost of everyday purchases, while others link the war in the Middle East to higher gasoline prices and broader effects on goods and services prices.

Financial confidence improves, but consumer demand stays weak

Consumers report better financial health than in the previous quarter, citing gains in financial asset values and greater confidence in the labour market. Workers’ views of the job market improve slightly but remain below the survey average, indicating that confidence is recovering only gradually.

Perceptions of the labour market improve among workers more exposed to trade with the United States, but deteriorate among workers in sectors where artificial intelligence poses a higher risk of task replacement. That split suggests trade and technology pressures are shaping confidence differently across the labour market.

Even with firmer views of finances and modest labour market improvement, spending plans deteriorate from already weak levels. High prices and broader economic uncertainty continue to restrain consumers, pointing to persistent pressure on household demand in Canada.

In our earlier article on rising U.S. toy prices ahead of the holiday season, we explained how tariffs on Chinese-made goods and higher oil-, shipping-, and commodity-linked costs were pushing retail prices up faster than many other categories. The piece also noted that manufacturers were feeling margin pressure and that Middle East-related disruptions could keep logistics and input costs elevated, reinforcing inflation strains for consumers.

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