Consumers report spending less on a broad range of goods and services over the past six months, according to the Bank of Canada’s latest Canadian Survey of Consumer Expectations—Fourth Quarter of 2022.
Gustavo Fring
“The growing costs of food and other necessities are a key concern for Canadians. Coupled with rising interest rates, these increased costs mean consumers are spending a larger share of their budget on necessities. As a result, they are decreasing their spending on a wide array of other products and services,” it said.
“Some people link high food inflation to price gouging and profit-taking. In addition to reducing spending on groceries and other goods and services, consumers report changing their buying habits, such as choosing less expensive brands, buying in bulk and looking for discounts.”
The report said a growing share of consumers plan to continue reducing their spending or to postpone purchases because of elevated inflation and interest rates.
“This is particularly the case for those with variable-rate mortgages or other debt (e.g., a line of credit used to finance renovations or other major purchases) who are feeling the pinch of higher interest rates. Most often, consumers are curbing spending on discretionary items, such as recreational services, to be able to pay for necessities. They may also delay or cancel larger purchases. For example, some consumers are delaying buying a vehicle,” said the Bank.
“Perceived tightening in credit conditions also limits people’s ability to spend. About six in 10 respondents reported having more difficulty accessing credit now than they did one year ago, and a similar share expect to face even further difficulty one year from now. People attribute tighter credit conditions primarily to: higher interest rates; stricter financing terms (i.e., down payment, collateral, etc.)
“Some consumers’ difficulties obtaining credit are leading them to anticipate weaker house price growth. Survey results indicate that most consumers are aware that higher interest rates are affecting affordability and making it hard for some people to purchase a home. Still, many believe the housing market will slow only modestly because they see a shortage of houses for sale in their neighbourhood.”
The Bank also said concern about the economy is widespread. On average, consumers said the likelihood of a recession in the next 12 months is 60 per cent. Just under half of those who expect a recession think it will be moderate in severity and length.
“Among low-income Canadians, expectations are more pessimistic; these consumers are more likely to believe a recession will be severe.”
(Mario Toneguzzi is Managing Editor of Canada’s Podcast. He has more than 40 years of experience as a daily newspaper writer, columnist, and editor. He worked for 35 years at the Calgary Herald, covering sports, crime, politics, health, faith, city and breaking news, and business. He works as well as a freelance writer for several national publications and as a consultant in communications and media relations/training. Mario was named in 2021 as one of the Top 10 Business Journalists in the World by PR News – the only Canadian to make the list)
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