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Confidence Continues Its Upward Climb

Canadian Economics

By: Loubna Zebiri

    

The Index of Consumer Confidence rose by 5.2 points in July to 62.7 (2014 = 100). The survey dates were July 11 to 20, 2025.

  • Consumer sentiment sustained its positive momentum in July, as the Index of Consumer Confidence rose to 62.7. This marks the fourth consecutive monthly gain this year.
  • The recent uptick in confidence points to a modest rebound in household sentiment, supported by a decline in perceived economic risks. The improvement also appears to be driven by more favorable macroeconomic signals, most notably easing inflation pressures and recent gains in the labour market.
  • However, although consumer confidence continues to edge up, it still remains below levels seen at this time last year.
  • Consumer sentiment improved across most regions in this month’s survey, with theexception of Quebec, where confidence fell by 4.0 points, and Saskatchewan-Manitoba and Ontario, where sentiment remained relatively unchanged.
  • Conversely, the Atlantic Canada region recorded the largest gain in July, as confidence increased 20.3 points to 90.7, the highest level since September 2024.
  • Other regions reporting notable gains in consumer confidence in July were Alberta, with a 20.1 point gain, and British Columbia, with a 12.2 point rise.
  • Perceptions of overall financial conditions remained largely neutral in July’s survey, as the proportion of households perceiving no change in their current financial situation compared to the past six months rose by 2.2 percentage points to 56.3 per cent. This represents the highest share recorded since April 2022.
  • At the same time, the share of respondents expecting their financial situation to remain unchanged six months from now increased 1.8 percentage points to 49.3 per cent, marking the highest level for this share since last November.
  • Expectations regarding future labour market conditions mirrored those for financial outlooks. The share of Canadians anticipating job opportunities to remain stable over the next six months rose 4.7 percentage points, reaching 44.2 per cent.

Insights

As expected, retail sales contracted in May, with headline sales declining by 1.1 per cent. This weakness was driven primarily by a 3.6 per cent drop in motor vehicle sales and a 1.2 per cent decline in food and beverage purchases. Core retail sales, excluding autos and gasoline, were relatively stable, signaling muted underlying consumer demand. Heightened trade tensions and broader economic uncertainty appear to have dampened sentiment, with 32 per cent of retail businesses surveyed reporting negative impacts from trade-related developments.

Easing inflation expectations are beginning to lift consumer sentiment after months of pressure. Recent inflation data show a clear deceleration in shelter and grocery prices. Year-over-year shelter inflation fell to 2.9 per cent in June and grocery inflation eased to 2.8 per cent, the later down from 3.3 per cent in May. As categories with high visibility and strong inflation inertia, their cooling helps reduce near-term price stickiness and contributes to the anchoring of inflation expectations. Overall, the share of households expecting inflation to be in the bank of Canada’s range of 1 to 3 per cent this year increased to 57.6 per cent this month, similar to the same period of last year.

As it approaches its next policy decision, the Bank of Canada will need to carefully weigh a complex set of macroeconomic indicators. Moderating inflation, coupled with some labour market softening in the first half of the year, suggests that slack is gradually emerging in the economy. Meanwhile, trade tensions and broader uncertainties continue to cloud the outlook. In this context, the Bank is expected to maintain a cautious stance in its end-of-month announcement. The consensus among economists points to the policy rate remaining unchanged at 2.75 per cent in July, as the Governing Council awaits further confirmation that inflation is on a sustained path back to target before proceeding with additional easing.

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