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Canada less optimistic about finances and inflation: survey
A new survey says Canadians are feeling less optimistic about their finances, with respondents worried about inflation, income levels and a possible mid-year recession.
TransUnion’s Canada Consumer Pulse study for Q2 2024 found that 57% of Canadian households said their incomes are not keeping up with the current rate of inflation, while 38% expect bill and loan payments to increase in the next three months.
This has led to changes in savings patterns, with some respondents indicating that they are saving more in their emergency fund, increasing their use of available credit, or adjusting their retirement savings plans.
Forty-six per cent of Canadians say their household finances are worse off than expected so far this year, up four percentage points from a year ago, according to the survey of 1,000 Canadian adult consumers conducted May 1-10. That’s despite nearly four in five reporting their income has stayed the same or increased over the past three months.
“I would say there has been a slight deterioration from the last few quarters,” said Matthew Fabian, director of financial services research and consulting at TransUnion.
“With the continued high cost of living and high interest rates, that has eaten away at some of their disposable income over time, and I think that’s starting to wear them down.”
Other findings from the survey include 58% of respondents reporting that they are not optimistic about the state of their household finances over the next 12 months, and nearly two-thirds indicating that they feel Canada is currently in a recession or will enter one before the end of the year.
About 86% said inflation is among their top three financial concerns for households over the next six months — the highest percentage since TransUnion began tracking it quarterly in 2022.
Last month, Statistics Canada reported that the annual inflation rate unexpectedly rose in May to 2.9 per cent, compared with 2.7 per cent in April.
This included a 5.6% increase in gasoline prices compared to the previous year and a 1.5% increase in food prices year-over-year.
Fabian said that while inflation has fallen over the past year, the rising cost of necessities like groceries, gasoline and utilities is still “plaguing” many consumers.
Food inflation has eased considerably in recent months, but food prices are 22.5 per cent higher than they were four years ago, Statistics Canada reported last month.
“The higher cost of these non-discretionary items creates a slightly larger payment shock because it forces these consumers to make trade-off choices about where their income goes,” Fabian said.
“So are they going to pay for these things or are they going to pay off debt? That creates a little bit more stress.”
About 27 per cent of Canadians plan to apply for new credit or refinance existing credit in the next year, up four percentage points from the previous quarter, according to the study.
This report by The Canadian Press was first published July 9, 2024