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Canadians feel less optimistic about their finances according to a new survey, with the majority of respondents saying that inflation continues to outpace their incomes. 

TransUnion’s Canada conducted its quarterly consumer pulse study and found that 57% of Canadian households said their incomes continue to be outpaced by high inflation rates, while 38% said they expected increased payments for bills and loans over the next three months.

The survey conducted from May 1-10 found that Canadians have shifted their saving habits to cope with a more volatile economy, saving more for emergencies, increasing their credit limits and altering their retirement savings plans. 

“Older Canadians are most concerned with rising inflation, as 66% of GenX and 60% of Boomers indicate their income does not keep up with inflation.  This could be due to the fact that many Boomers and some GenX are at or near retirement and might have fixed retirement incomes,” Matt Fabian, director of financial services research and consulting at TransUnion Canada told True North.   

The first six months have been a rough start to 2024, with 46% of Canadians saying that their finances are in a worse place than planned, up from 42% in the second quarter of last year. 

Despite their financial plans suffering, almost four in five of that cohort also reported that their income had either stayed the same or increased in the last three months.

 “Overall, pressure on non-discretionary items creates even more of an overall payment shock and can increase the level of concern as consumers make trade-off choices as to where their income is directed,” said Fabian. 

“Inflationary pressures most concerning to households are those categories that are non-discretionary.  Canadians surveyed are most concerned with the cost of groceries (89%), Gasoline (61%), and utilities (52%). These tend to be of more importance in their hierarchy potentially leaving less disposable income.”

The survey also found that 58% of Canadians were not optimistic about the state of their household finances over the next 12 months, with nearly two-thirds saying that they believe the country is currently experiencing a recession or will be by the end of 2024. 

The overwhelming majority of respondents, 86%, said that inflation was among their top three household financial concerns, marking the highest percentage since TransUnion began tracking it in 2022.

“Inflation has hit us hard in recent years and, despite the fact it is now trending down, families still feel the pinch from those past price hikes,” Renaud Brossard, vice president of Communications at the Montreal Economic Institute told True North. 

“To help bring both it and interest rates down, we need politicians in Ottawa to start cutting back on deficit spending and start living within their means.”

Statistics Canada confirmed last month that the annual inflation rate increased in May by 2.9%, compared with 2.7% in April.

That uptick included gasoline prices rising 5.6%, compared with a year ago and grocery prices increasing 1.5% year-over-year.

While inflation decreased slightly over the past year, the rising cost of groceries, gasoline and utilities are still keeping a firm grip on Canadians’ wallets.

According to the study, around 27% of Canadians plan to apply for new credit or refinance existing credit in the next year, up four percentage points from the first quarter of 2024.

“Part of this increased demand might reflect the need for additional liquidity through this economic cycle. Some of the hesitation about whether to take on new credit was aligned to interest rates; 62% indicated rising interest rates have a moderate or high impact on whether they’ll apply for credit in the next 12 months,” reads the study.

“Younger generations were more sensitive to this as 77% of Gen Z and 74% of Millennials said rising interest rates have a moderate or high impact on whether or not they’ll apply for credit in the next 12 months compared to 59% of Gen X and 47% of Baby Boomers.”

Across all ages of respondents, 15% indicated that they would consider buying a new home in the next year. TransUnion Canada said that “while this number may appear low, it’s up 3 percentage points from the previous quarter.”

“Of those who indicated they’re likely to purchase, rising home prices (66%), rising interest rates (56%) and the amount needed for down payment (40%) were the top three reasons they’d stop considering purchasing a home in the next year.”