Consumers could start feeling financial relief by 2027, says CIBC

Consumers in Canada may start experiencing financial relief by 2027, according to a new report from the Royal Bank of Canada (CIBC). In a statement, senior economist Katherine Judge said that while the transition may take time, trade clarity ahead and the fading of current constraints could lead to better economic times.

The report, titled 'Unshackled? How the constraints on Canadian consumers should loosen in '27,' highlights that several financial pressures such as high inflation, rising gas prices, and mortgage rate renewals that saw homeowners lock in at higher rates compared to the COVID-19 pandemic are expected to ease in 2027.

Currently, Canadian consumer spending has been held back due to restraints such as high inflation for essentials like food, refinancing mortgages at higher rates, and the spike in gasoline prices. Lower-income Canadians have been particularly impacted by the higher gas prices in 2026.

However, CIBC believes that the most severe restraint from high gasoline prices may have passed. The federal government's income support measures, including the Canada Groceries and Essentials Benefit, will provide additional relief, especially for lower-income households.

Mortgages are also a significant area of concern for consumers. A separate report found that almost half of Canadians surveyed said that more than half of their paycheques are being consumed by their housing costs since renewing their mortgages this year. CIBC predicts that 2027 will see a more stable interest rate environment, even if rates go up a bit.

The pressure from mortgage renewals at higher rates is expected to ease, particularly in the second half of 2027. This should allow consumers to feel more empowered to spend on non-essential items such as leisure and entertainment.

Furthermore, if trade negotiations with the United States go well and there are no further tariff escalations, the resulting sense of stability and certainty in the economy could lead to more hiring and a more stable job market. This, in turn, could boost consumer confidence and spending.

In July, Canada's unemployment rate fell to 6.4 percent, the third straight monthly decline. If tariffs do not escalate, more certainty in the trade environment will allow businesses to adjust and continue hiring. A trade deal could further accelerate this process, potentially leading to the unemployment rate falling below six percent in the second half of 2027.