Canadian Consumers Cite Tariffs and Energy as Inflation Drivers

Consumers continued to cite tariffs and energy prices as key inflation sources in the third quarter of 2026. Expectations rose after trade talks between Canada and the United States broke down. This weighs on spending plans and may influence future borrowing costs.

The Canadian Survey of Consumer Expectations—Third Quarter of 2026, released on October 19, 2026, provides fresh data on how Canadian consumers are perceiving inflation. Conducted from August 5 to 27, 2026, with follow-up interviews from August 24 to September 4, 2026, the survey captures the impact of trade tensions. About three-quarters of responses were collected before the breakdown of trade talks on August 21 and the announcement of new Canadian counter-tariffs.

Inflation Expectations Rise to Match Elevated Short-Term Levels

In the third quarter of 2026, consumers’ long-term inflation expectations rose to match elevated shorter-term expectations. Consumers’ perceptions of current inflation and expectations for inflation over the next 12 months and 24 months were little changed. Near-term expectations remain above both their historical average and levels seen before trade tensions began. At the same time, long-term inflation expectations moved higher this quarter, bringing them in line with already elevated short-term expectations.

This increase occurred following the breakdown in trade talks between Canada and the United States. Consumers who responded after the talks collapsed reported slightly higher inflation expectations at all horizons. One respondent noted, “There’s been a lot more news about more tariffs coming in, taxed at very high percentage rates,” and added that the discussions “have not been successful, [and] in the near future, I think there's going to be a lot more tariffs on Canadian products.”

Tariffs and Energy Prices Cited as Primary Inflation Drivers

Consumers continued to cite tariffs and trade tensions as the top factor affecting inflation. Respondents were somewhat more likely to cite tariffs and trade tensions after the talks broke down. In follow-up interviews, many consumers described how tariffs were raising prices of everyday purchases. Energy prices were also still widely cited as a source of inflation, although fewer respondents mentioned them than in the previous quarter.

Most consumers believe the war in the Middle East will raise inflation over the next 12 months. Several respondents linked the conflict to concerns about higher gasoline prices and their effects on other goods and services. One respondent explained, “I think anything that happens [in the Middle East] will affect economies worldwide and trickle all the way down to the local economy where I live…mainly [through] oil prices. And when you’re affecting oil prices, that, again, trickles to groceries because, obviously, you need oil to move groceries around.”

For Canadian households, tariffs refer to taxes on goods imported from other countries, like from the United States. This can make imported products more expensive, affecting prices at grocery stores, gas stations, and other retailers. Energy prices, such as gasoline, are influenced by global oil markets and events like the Middle East conflict, which can lead to higher costs at the pump and for transportation of goods.

Inflation is the general increase in prices over time, eroding purchasing power. When expectations rise, consumers anticipate higher prices ahead, which can delay purchases. The survey data is factual from the online panel. The analysis is the potential effects on spending and borrowing, which are possible consequences based on the reported perceptions.

Financial Health Perceptions Improve Slightly

The Canadian Survey of Consumer Expectations (CSCE) indicator edged higher in the third quarter. Better perceptions of financial health accounted for most of the increase, while views of the labour market rose modestly. These gains were partly offset by weaker spending intentions. Even so, the CSCE indicator remains low and only slightly above levels observed when trade tensions with the United States began.

Consumers reported feeling better about their financial health in the third quarter, perceiving a lower risk of missing a debt payment and easier access to credit. Confidence about their finances over the next 12 months also improved. Compared with the previous quarter, consumers expecting their financial situation to improve over the next 12 months more often attributed that optimism to higher financial asset values and greater confidence in the labour market. One respondent said, “I make more money now…. I get regular raises here.”

Labour Market Perceptions and Spending Plans

The CSCE labour market index edged up in the third quarter, recovering further from the decline observed at the onset of trade tensions, but remains below its survey average. Consumers reported a somewhat higher likelihood of voluntarily leaving a job and slightly greater confidence in finding a new one than in the previous quarter. However, concerns about job loss also increased, though modestly.

The labour market index increased among workers employed in sectors more reliant on trade with the United States, although most responses were collected before trade talks broke down. Part of the improvement may reflect conditions among natural resource firms, where elevated commodity prices and expansions in production and transportation capacity are supporting export sales, particularly in oil and gas. Even so, job-loss concerns among these workers remain elevated because of uncertainty around US trade policy. One respondent stated, “There’s a lot of uncertainty with the tariffs. Some companies, if [they are hit with] 50% tariffs, it really affects the”

Despite improvements in financial health and labour market perceptions, spending plans deteriorated from already weak levels. High prices and economic uncertainty continue to weigh on consumers. About half of consumers continue to expect the Canadian economy to fall into a recession over the next 12 months, particularly those who responded to the survey after trade talks collapsed.

Practical Consequences for Households

For Canadian households, the findings indicate that tariffs and energy prices are key inflation drivers that could lead to higher costs for everyday purchases. While financial health perceptions have improved, weaker spending plans indicate that consumers are holding back on big purchases, which may affect businesses and the economy. Borrowing plans could be influenced by higher inflation expectations, potentially leading to more cautious approaches to loans if rates adjust.

Workers in trade-exposed sectors may see mixed effects, with some gains in perceptions but persistent uncertainty. The survey highlights the importance of monitoring trade tensions and energy prices for Canadian households, workers, and businesses.

In conclusion, the Q3 2026 survey underscores the significant role of tariffs and energy prices in shaping inflation expectations. To watch next: the Bank of Canada’s October 28, 2026 announcement and any updates on Canada-US trade relations.