It's looking like Canada could enter a recession, but it's not guaranteed: Stephen Poloz
Amid rising interest rates and economic uncertainty, Canadian consumers appear to be bracing themselves for a downturn in 2023, with many planning to reduce spending or delay large purchases, according to a new survey.
A survey released Tuesday from Canadian legal and administrative software company Dye & Durham Ltd. found that 30 per cent of respondents believe Canada is already in a recession. It also revealed that 53 per cent of people surveyed believe Canada is imminently entering a recession. Just under half of the respondents, 48 per cent, said they do not believe the Bank of Canada’s interest rate hikes are having a cooling effect on inflation.
“The effects that the one-two punch of rising interest rates and recession worries are having on spending and real estate plans cannot be understated. The average Canadian is concerned about what lies ahead and is bracing for a recession by tightening up their spending and delaying major purchases,” Martha Vallance, Dye & Durham’s chief operating officer, said in a release Tuesday.
Savings appear to also be at risk. According to the release, 30 per cent of those surveyed said they’ve had to rely more on their savings than they originally anticipated this year. Another 17 per cent said they have accrued debt to pay off their bills. Some 57 per cent of respondents expect to curtail spending during the holiday season, the release said.
“The knock-on effect that this is likely to have on the businesses and professionals that rely on consumer spending and real estate transactions in 2023 is significant,” Vallance said.
Canadians also seem to believe an upcoming downturn could be long-lasting. Around 53 per cent believe inflation will increase over the next six months, while 32 per cent of those surveyed said they anticipate the Canadian central bank will increase interest rates by another 100 basis points before the end of the year. Bank of Canada officials have frequently expressed concern over the past year on how high inflation levels could be entrenched among Canadian consumers, which could keep prices stubbornly high for longer.
Those looking to sell real estate also appear to be expecting a downturn. Forty-seven per cent of those surveyed said they plan to delay a major purchase or real estate transaction over the next year due to heightened interest rates, the release said.
The survey also found that 17 per cent of Canadians looking to sell their home do not think it will ever reach the same value as it was before the Bank of Canada began raising interest rates in March.
Data for the survey was collected by Dye & Durham between Oct. 19-21. Respondents consisted of 1,515 members of the online Angus Reid Forum. Responses were balanced across age, gender, region and education criteria.