Canadians continue to feel rattled by the state of the economy and their finances.

Released on Monday, the latest results from the Bank of Canada’s Canadian Survey of Consumer Expectations* show that the combined level of pessimism consumers are feeling regarding their spending plans, personal finances, and the labour market improved marginally in the first quarter of 2026 (see the graph below). Despite the improvement, the index was in negative territory for the 18th quarter in a row.

The Bank of Canada attributes the improvement in sentiment to the easing of trade tensions with workers in trade-sensitive sectors being less negative about their spending plans than at the end of 2025. The survey was conducted before the Iran war began.

The generally pessimistic outlook of consumers is in keeping with other poll results. For example, 74% of respondents to a survey done in March said rising prices for essentials like food and gas were straining their finances and 67% of respondents to a survey done in December said the cost of living where they live is the worst they can remember it being.

Despite the high levels of consumer anxiety, retail spending has been resilient. After posting annual growth of 4% last year, retail sales in Canada were off to a good start in January. Wealthier households helping to prop up overall spending, strong tourism numbers, and drawing on savings or credit to meet ongoing needs help explain the disconnect.

With the conflict in the Middle East already pushing up inflation and potentially more costs going up as higher energy and fertilizer prices pass through to other goods and services, there is more downward pressure on consumer confidence. At some point, this could translate into lower retail sales as more consumers delay major purchases or run out of savings and credit. A special survey conducted by the Bank after the conflict in the Middle East began indicates that most consumers expect the war to weaken the Canadian economy and increase inflation.

While the risk that consumers could start to pull back their spending is real, our base case still assumes that the impact of the war will be brief enough that the resiliency we’ve seen to date will continue. In this regard, Alberta—which faces a lower average tariff rate than other provinces and is getting a nominal economic boost from higher oil prices—is expected to be a particularly strong performer with annual retail sales growing by over 4% this year.

*The Canadian Survey of Consumer Expectations was conducted through an online panel from February 5 to 25, 2026, before the war in the Middle East began. This quarter’s publication incorporates results from a special survey, conducted between March 26 and April 2, 2026, on how the war in the Middle East is affecting consumers' views and behaviours.

Answer to the previous trivia question: Leaded gasoline was banned in Canada under the Canadian Environmental Protection Act effective December 1, 1990.

Today’s trivia question: The national inflation rate reached its highest point since the 1980s in June 2022. What was the inflation rate that month?