BoC: Canadians expect to earn less, spend less post-lockdown

Data suggests that Canadian households are cautious amid negative sentiment on income, employment, and the housing market

BoC: Canadians expect to earn less, spend less post-lockdown
Steve Randall

Canadian households are preparing for lower income by cutting back their spending to focus on essentials.

The results of a survey from the Bank of Canada (conducted May 11 to June 1) shows that most households are expecting tough times ahead with income growth of just 1.9% in the next 12 months; at the start of the year the expectation was for 2.3%.

With less coming in, spending is being reduced.

In the second quarter of 2020, the survey shows expected spending growth of 2.2%, a sharp drop from the 3.8% in the first quarter. It means that the gap between expected income growth and expected spending growth has narrowed significantly.

Increased spending was expected for groceries, shelter, and health and personal care. The largest reduction in spending was in travel and transportation, and restaurants and other social activities.

Households’ caution is driven by several negative outlooks including the labour and housing markets.

The data suggests weakening sentiment on job opportunities with expected wage growth of less than 2% for the next 12 months, lagging the expected rise in inflation of 2.75%.

Respondents also said their wages had fallen 1% over the past 12 months, largely due to losing their job or working fewer hours.

House price growth to crash
The survey found an expectation that there will be no growth in house prices over the next 12 months.

This compares to the 4.8% increase in prices in respondents’ own areas that the first quarter survey revealed.

In Alberta, Saskatchewan and British Columbia, respondents are expecting prices to drop.