Food prices and housing expenses, which include residential investment, account for about 40% of all Canadian inflation and often contribute to a larger portion of lower-income Canadians’ spending. Inflation in housing costs, which have risen to nearly seven per cent this year, remains buoyed due to rising rent and mortgage rates.
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The Bank of Canada also emphasized how demand for services like travel, lodging, dining out, and communication services will be affected. Spending on expensive products like cars, furniture, and appliances is already showing signs of softening.
The BOC also noted that household spending should increase in the second half of 2023 and throughout 2024.
It expects strong immigration to help raise the number of new homes purchased, and population growth and increased disposable income will support rising demand as monetary policy is anticipated to loosen by late 2023.
