Wall Street reacted positively to Trump’s initial tariff backpedalling, pushing US equity futures higher. This is a sign that he may pursue a less protectionist approach; for now, it is a boon for multinational companies that rely on cross-border commerce, giving them time to adjust pricing and mitigate any impact on profit margins.
The US dollar, however, slumped, albeit briefly. Canada’s dollar has traded markedly below the US dollar for years. And, although we promised to tighten our border restrictions, the US’s illegal immigration problems have little to do with Canada.
The Bank of Canada’s fourth-quarter consumer expectations survey reveals that despite recession concerns, 22.4% of respondents see a greater than 50% chance of moving to a new primary residence within the next year—up from 21.1% in the previous quarter.
Similarly, 13.5% of respondents plan to sell their home within the next year, up from 11.4% in Q3. The results also show increased interest from renters, with 19.9% considering a home purchase in the next 12 months, compared to 16.9% last quarter.
The Bank of Canada attributes the rise in homebuying intentions to expectations of further interest rate cuts in 2025.
“Survey results show that these home buying intentions are supported by consumers seeing and expecting easier credit conditions,” the report notes.
However, it also cautions that the timing of home purchases remains uncertain for many: “…those planning to buy a home over the next 12 months said they anticipate around a 50% probability of actually carrying through with those plans.”
The Q4 survey revealed that inflation expectations have primarily returned to historical norms. Consumers’ inflation expectations for food and gas stayed steady in the fourth quarter, while expectations for rent eased. However, they still anticipate rent will rise faster than pre-pandemic levels.
As a result of the improving inflation outlook, consumers expressed strong intentions to increase spending on essentials and housing over the next year. For the first time since 2021, they anticipate spending will outpace price increases.
While the new administration in Washington poses considerable uncertainty for the Canadian economy, the odds are that the Bank of Canada will successfully master a noninflationary rebound in economic activity in 2026.
