The survey reveals January saw a spike to 55% in Canadians stressed over finances
In January, a significant increase in financial concerns among Canadians hit a new peak, with a household outlook survey revealing that 55 percent are now worried about their personal and daily finances.
This marks a notable rise from 52 percent in December and represents the highest level of concern since the survey, conducted by Maru Public Opinion, commenced in July 2020.
The survey further unveiled additional signs of financial distress. A striking 41 percent of respondents admitted they were struggling to make ends meet in January, an increase from 38 percent the previous month.
Moreover, one-third of those surveyed disclosed they were depending on government benefits “to keep their head above water,” marking a rise of four percentage points from the last survey.
John Wright, executive vice-president of Maru Public Opinion, reflected on the changing financial landscape, noting, “People are relating back to where they were when interest rates were low, and they had savings in the bank. That’s all gone away.”
With interest rates now at a more than two-decade high of five percent, Canadians are incurring more debt, as indicated by Equifax data showing consumer debt reached $2.4tn in the third quarter of 2023, an $80.9bn uptick from the previous year.
This accumulation of debt has plunged consumers into a “mostly pessimistic” mood, as captured by the Maru Household Outlook Index.
For January, the index stood at 86, with scores below 100 indicating negative sentiment. This figure has been persistently low since December 2021, barely higher than its most pessimistic score of 83 in March 2023.
Wright vividly described the current sentiment with, “This month’s index is like an elevator stalled and hanging by a thread over a deep, dark shaft.”
Despite this grim metaphor, the index avoided “freefall” thanks to a slight uptick in optimism in certain categories, including some people's expectations for their local economy to improve within the next 60 days.
Even so, 67 percent of Canadians continue to believe the economy is on the wrong track, a sentiment unchanged from the previous survey. Furthermore, 61 percent do not foresee the national economy improving in the next two months.
This sentiment marks a drastic reversal from the optimism observed in December, which was partly based on the anticipation that the Bank of Canada might soon announce interest rate cuts. However, at its most recent meeting on January 24, the bank-maintained rates at their current level, with Governor Tiff Macklem suggesting that officials are cautious about reducing rates.
Despite the pervasive pessimism, not all indicators are negative. The GDP for the final quarter of 2023 is expected to be stronger than anticipated, potentially leading to a soft economic landing rather than a recession.
The International Monetary Fund has forecasted that Canada's economy will grow at the third-fastest rate among its advanced peers. Additionally, the job market remains robust, with wages continuing to rise.
Nevertheless, Wright highlights a profound disconnection between the perspectives of financial professionals and ordinary Canadians.
He pointed out the particular challenge of January, a month significant for setting a positive tone for the year yet made more difficult as deductions for the Canada Pension Plan and employment insurance resume for some. Wright concluded, “Some people are doing OK. The average Canadian is not.”
