Economics at a Glance – Canada: Updated: Feb 14, 2026
1. Soft start to 2026 for consumer spending
TD Economics reported that internal card‑spending data point to a weak start to January for Canadian consumers, even though there were few official data releases on the calendar this week. This suggests households are still cautious, consistent with a high‑cost environment where prices remain much higher than before the post‑pandemic run‑up, even as inflation itself has slowed.
Explanation: Slower card spending usually signals pressure on discretionary purchases as households prioritize essentials and debt payments. TD’s read is that demand is not collapsing, but momentum is subdued heading into 2026, which limits how quickly growth can re‑accelerate even as interest rates have come down from their peaks. For a practical example, weaker restaurant and retail transactions early in the year often foreshadow softer retail sales prints in official Statistics Canada releases a month or two later.
2. Consumer insolvencies ticking up again
December insolvency data showed that the three‑month moving average of consumer insolvency filings has started to rise again, although the level is not yet considered alarming by TD Economics. This comes after several months where insolvency trends had plateaued, suggesting that some households are now hitting the limits of their capacity to absorb higher living costs and prior rate increases.
Explanation: Rising insolvencies usually lag the rate‑hike cycle; people first tighten budgets, then draw on savings and credit, and only later show up in formal insolvency statistics. The fact that filings are edging higher while policy rates are no longer rising indicates that the accumulated stress from past high rates and elevated prices is still working its way through the system. Policymakers and lenders will watch whether this upturn remains modest or broadens, as a sharper increase would be a warning sign for consumer credit quality and spending.
3. Bank of Canada expected to hold rates in March
Analysts at TD Economics and RBC both expect the Bank of Canada (BoC) to leave its policy rate unchanged at the March meeting, with risks around inflation described as “balanced.” RBC’s broader 2026 outlook assumes the overnight rate stays at 2.25% with no additional easing and no hikes until at least 2027, reflecting a desire to keep policy restrictive enough to contain inflation while the economy grows modestly.
Explanation: Recent inflation readings have shown softer headline numbers but some renewed firmness in core and services inflation, which argues against rapid cuts. The BoC’s recent communications also emphasize that inflation is expected to remain near the 2% target, but trade‑related cost pressures and the costs of reconfiguring supply chains are still adding some upward pressure. In practice, this means mortgage and other borrowing costs may not fall much further in the near term, even though rate hikes are likely over.
4. Trade and tariff uncertainty as a major overhang
The Bank of Canada and major private‑sector forecasters highlighted US tariff policy and the upcoming review of CUSMA (the Canada‑US‑Mexico Agreement) as key sources of uncertainty for Canada’s outlook.
5. Inflation improving, but affordability still strained
Recent commentary from ATB Financial and RBC emphasizes that inflation is now close to the 2% target, and wages are expected to outpace inflation again in 2026, which is positive for real income growth. However, both also stress that the price level is roughly 20% higher than in early 2021, compared with about 10% if inflation had stayed at 2%, meaning the affordability shock is still very real for households.
Explanation: Slower inflation means prices are rising more slowly, not falling, so households continue to live with a permanently higher cost base. RBC notes that fiscal stimulus, including defence and infrastructure spending from recent federal budgets, is expected to add about 0.4 percentage points to GDP growth in 2025 and 2026, partially offsetting the drag from trade and helping labour markets. But for individual households, the combination of high price levels, elevated (if stable) interest rates, and rising insolvencies explains why sentiment surveys still show many Canadians expecting the economy to feel “uncertain and expensive,” even as the macro data look relatively stable.
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