Are Canadians slowing their spending in preparation for a recession?

By: Zandile Chiwanza on January 9, 2020

Recession fears continue to plague Canadian households even as most economists suggest it will be just another year of sluggish growth, rather than a full-blown downturn.

In a recent survey for Bloomberg News, 55% of Canadians said they believe there’s at least a “somewhat likely” chance of a recession in 2020. 

The survey revealed that recession concerns are most evident in the prairie provinces (Alberta, Saskatchewan, and Manitoba), where 73% of households see a chance of an economic downturn. 

The survey also revealed a “majority of respondents in British Columbia and Ontario are concerned a recession is “imminent.”

However, Quebec was the only province where “optimists outnumbered pessimists,” with only 39% believing there’s a chance of a recession. 

Most economists predict Canada’s economy will expand by a modest 1.6% this year, about the same as 2019.

“Canada’s expansion will be lacklustre in 2020,” said Andrew Husby, Bloomberg Economics. 

However, The Globe and Mail reported “Canada’s most famous economist thinks there’s an 80% chance of recession next year … owing in part to mammoth levels of household debt, which will continue to be a drag on consumer spending.”

Economic data are starting to look concerning

There’s been a slew of worrying data in the past few months.

Excluding housing, growth in total household consumption has averaged 1.1 % over the past year, “the slowest pace outside recession since at least 1962.”

Housing market news site Better Dwelling reported this week that retail trade saw its largest decline since March 2016 in October (1.1 %). 

Savings rates are now at the highest rate since 2015, which is a sign of cautiousness.

“Saddled with some of the highest household debt levels in the world, Canadians have already slowed their spending to the weakest in at least half a century, in part because they are saving more to brace for a potential hit,” the Financial Post said

The Bloomberg survey was conducted by Nanos Research Group, between Dec. 22 and Dec. 29, and the results are based on a telephone and online random survey of 1,010 Canadians. 

Here are the results: