There may be a glimmer of hope next year for consumers who are feeling the pinch from the heightened cost of living, according to a new report from CIBC.
“We view 2026 as a transition year, with expectations for trade clarity ahead, while many of the constraints on consumers that are currently in place should fade in 2027,” said senior economist Katherine Judge at CIBC in a statement.
“So we are cautiously optimistic that better economic times lie ahead.”
CIBC’s report, released Tuesday, is titled ‘Unshackled? How the constraints on Canadian consumers should loosen in ‘27,’ and was co-written by senior economists Andrew Grantham and Judge.
The report explains how some financial pressures are expected to ease in 2027, including high inflation, spiking gas prices in the fallout from the Iran war and the shock from a recent wave of mortgage rate renewals that saw many homeowners lock in at higher rates compared to during the COVID-19 pandemic.
Although prices generally won’t be coming down, CIBC says Canadians may soon find it a bit easier to afford some goods and services.
“Canadian consumer spending has been held back by a number of restraints in recent years,” the report says.
“Facing high inflation for essentials such as food, mortgages refinancing at higher rates, and most recently, a spike in gasoline prices, households have had less money to spend on more discretionary items.”
“However, that could change, with some of the restraints to spending likely to loosen in 2027.”
Gas prices remain elevated as uncertainty and volatility persist in the Middle East region, and CIBC says lower-income Canadians have been impacted the most by higher gas prices in 2026.
The federal government launched several measures aimed at tackling affordability this year, including the Canada Groceries and Essentials Benefit, which CIBC says will go even further next year.
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“Elevated prices for gasoline and other essentials are squeezing lower-income households in particular in Canada,” said Judge.
“The federal government’s income support measures are providing a material offset, however, and if gasoline prices ease over the rest of the year, that will free up more spending power in 2027.”
“There are some positives ahead. While admittedly not guaranteed, the tightest restraint from high gasoline prices may have passed,” the CIBC report said.
In its report, mortgages are also a key area CIBC focuses on when it comes to consumers struggling to make ends meet.
A separate report from Rates.ca on Tuesday found almost half of Canadians surveyed said that since renewing their mortgages this year, more than half of their paycheques are being eaten up by their housing costs.
CIBC says, for the most part, mortgage rate affordability challenges are peaking and 2027 will see a more stable interest rate environment — even if they go up a bit.
“The pressure from mortgages renewing at higher rates should start to ease, with recent Bank of Canada research showing much more modest increases at the time of renewal by the second half of 2027,” the CIBC report says.
Judge says “the squeeze” from the higher post-pandemic mortgage renewal wave will fade now and into 2027, and as that shock subsides, consumers will gradually feel more empowered to spend more on non-essentials like leisure and entertainment.
Judge also says that if current trade negotiations with the U.S. go well, and there are no further tariff escalations, then the resulting sense of stability and certainty in the economy will empower businesses and investment, which can result in more hiring. A more stable job market and employment for Canadians can also help consumers feel more confident.
Canada’s unemployment rate fell to 6.4 per cent in July, according to Statistics Canada, which was the third straight monthly decline.
“Assuming that tariffs do not escalate from here, more certainty on the trade environment ahead will allow businesses to adjust and continue hiring,” said Judge.
“Any progress in reaching a trade deal will accelerate that process, and we expect the unemployment rate to fall to below six per cent in the second half of 2027.”
– with a file from Global News’ Uday Rana
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