Survey Shows Canadians’ Optimism About Finances Declining Due to Concerns About Inflation and Income

A recent survey reveals that Canadians are becoming less optimistic about their financial situation, expressing concerns about inflation, income levels, and the possibility of a recession in the near future.

The Canada consumer pulse study by TransUnion for the second quarter of 2024 indicates that 57 percent of Canadian households feel that their incomes are not keeping pace with the current inflation rate. Additionally, 38 percent anticipate an increase in payments for bills and loans over the next three months.

These findings have led to changes in saving habits, with some respondents reporting an increase in emergency fund savings, elevated use of available credit, or adjustments to retirement savings plans.

According to the survey of 1,000 Canadian adult consumers conducted from May 1-10, 46 percent state that their household finances are worse off than expected this year, a four-percentage-point increase from the previous year. This is despite nearly four in five respondents claiming that their income has either remained the same or increased in the last three months.

Matthew Fabian, director of financial services research and consulting at TransUnion, notes, “I would say it’s deteriorated slightly from the last couple of quarters. As the high cost of living and high interest rates have continued, it’s eroded some of their disposable income over time, and I think it’s starting to wear on them.”

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Additional insights from the survey indicate that 58 percent of respondents lack optimism regarding the state of their household finances in the next year, and almost two-thirds believe Canada is currently in a recession or will experience one before the year concludes.

Around 86 percent of participants identified inflation as one of their top three financial concerns for the next six months—this is the highest percentage recorded since TransUnion began quarterly tracking in 2022.

Last month, Statistics Canada reported an unexpected increase in the annual inflation rate to 2.9 percent in May, up from 2.7 percent in April. Notable factors contributing to this rise include a 5.6 percent increase in gasoline prices and a 1.5 percent increase in grocery prices compared to the previous year.

Mr. Fabian highlighted that although inflation has decreased over the past year, the escalating costs of essentials like groceries, gasoline, and utilities continue to burden many consumers. Grocery prices have risen by 22.5 percent in the last four years, according to Statistics Canada.

“The higher cost of those non-discretionary items creates a little bit more payment shock because it forces these consumers to make trade-off choices as to where their income is directed,” Mr. Fabian explained. “So are they going to pay for these things or are they going to pay down debt? It creates a little bit more stress.”

The study shows that 27 percent of Canadians plan to seek new credit or refinance existing credit in the next year, indicating a four-percentage-point increase from the previous quarter.