Oct 30, 2026
About half of Canadian consumers expect the economy to enter a recession within the next 12 months, according to the Bank of Canada’s (BoC) third-quarter 2026 Canadian Survey of Consumer Expectations.
Yet, despite fears associated with a slowing economy — including a plan to slow personal spending — Canadians are reporting an improvement in personal financial health. The results of the BoC survey reveal a mixed outlook for Canadian households with recession fears widespread across the nation.
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Here’s what the findings say about the economy — and how to prepare your finances without overreacting.
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Why the BoC watches what you expect inflation to be
The BoC tracks inflation expectations because they can influence how households spend, save and borrow.
If consumers expect prices to keep rising, they may bring purchases forward, cut discretionary spending or seek higher wages. Those choices can affect demand across the economy and complicate the task of bringing inflation back to target.
Now, in the third quarter of 2026, Canadian consumers are increasingly convinced that long-term inflation is here to stay — with 3.9% respondents anticipating still higher living costs, up from 3.4% in the previous quarter. Tariffs, trade tensions and energy prices remained key concerns.
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Who sees a recession coming?
About half of consumers expected Canada to enter a recession within 12 months, while businesses were considerably less pessimistic.
In her analysis of the BoC’s third-quarter business and consumer surveys, TD economist Maria Solovieva reported that the share of firms expecting a recession fell to 6%, from 17% in the previous quarter.
“The divergence between consumers’ and businesses’ inflation expectations is puzzling,” noted Solovieva. “Consumers anticipate stronger and more persistent long-term pressures, while businesses continue to view the recent inflation shock as temporary.”
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There is an important timing caveat to the survey results, with roughly three-quarters of responses to both surveys collected before Canada-U.S. trade talks broke down around Aug. 21, 2026. Solovieva noted that responses gathered after the collapse pointed to a somewhat more negative outlook.
The consumer findings were mixed, too. Perceptions of personal financial health improved, helped by higher financial asset values and greater confidence in the labour market. But spending intentions fell by 13 percentage points, particularly among households expecting higher inflation.
Overall, the results suggest consumers were more worried about the economy than businesses were in the same quarter, with ongoing uncertainty continuing to dampen household spending.
The AI-anxiety finding
The BoC survey also found that workers in sectors where artificial intelligence (AI) poses a greater risk of replacing tasks remained more concerned about job security. They were also less confident about finding another job, contributing to weaker labour-market perceptions among this group.
Still, AI use at work was not uniformly negative. About 40% of workers said they used AI on the job, and those users estimated they would need about five additional hours each week to complete the same amount of work without it.
The results point to two different concerns: AI can help workers become more productive, while leaving some uncertain about the future of their roles or employment prospects.
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A recession-ready checklist
While the survey does not predict if or when a recession may occur, it is a reminder that smart strategies can be used to lessen the impact of an economic downturn.
Here’s how to check if your finances would hold up if your income fell or expenses increased.
- Build an emergency buffer. Set aside what you can for essential expenses if your income is interrupted. If several months of savings feels out of reach, start with a smaller, achievable target.
- Prioritize high-interest debt. Keep up with required payments and, where possible, direct extra money towards balances carrying the highest interest rates.
- Review recurring expenses. Look at housing, insurance, subscriptions and vehicle costs. Knowing what you could cut if necessary gives you more flexibility if your circumstances change.
- Stress-test your budget. Consider how you would manage if your hours were reduced, a household income disappeared temporarily or an unexpected bill arrived. Identify which costs you could reduce and what savings you could draw on.
- Avoid knee-jerk investment decisions. Before changing a long-term investment strategy because of recession headlines, consider your time horizon, risk tolerance and actual financial needs.
Canadians cannot control whether the economy enters a recession, but they can prepare for the possibility.
Building savings where possible, reducing expensive debt and knowing which expenses could be adjusted are more useful responses to uncertainty than making major financial decisions based on recession headlines alone.
Money.ca sought comment from Maria Solovieva at TD Economics and Chuck Grace, Founder at Canada’s Financial Wellness Lab. There was no response from either representative at the time of publication.
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Steven Brennan is a freelance finance writer based in Vancouver, BC. He holds a BA and an MA from Maynooth University, Ireland. His work regularly appears at Canadian Mortgage Trends, Lowest Rates, Loans Canada and other Canadian and U.S. brands.
