Worried Young Couple Lying On Carpet Calculating Their savings, planning future, retirement fund

A new survey says Canadians are feeling less optimistic about their finances, with respondents worried about inflation, income levels and a potential recession at the midpoint of the year.

TransUnion’s Canada consumer pulse study for the second quarter of 2024 found 57% of Canadian households said their incomes are not keeping up with the current inflation rate, while 38% expect payments for bills and loans to increase over the next three months.

This has prompted shifts in saving patterns, with some respondents indicating they are saving more in their emergency fund, increasing usage of available credit or adjusting their retirement savings plans.

About 46% of Canadians say their household finances are worse than planned so far this year, up four percentage points from a year ago, according to the survey of 1,000 Canadian adult consumers conducted from May 1-10. That’s despite almost four in five reporting their income either stayed the same or increased in the last three months.

“I would say it’s deteriorated slightly from the last couple of quarters,” said Matthew Fabian, director of financial services research and consulting at TransUnion.

“As the high cost of living and high interest rates have continued, it’s kind of eroded some of their disposable income over time, and I think it’s starting to wear on them.”

Other findings of the survey include 58% of respondents reporting they are not optimistic about the state of their household finances over the next 12 months, and nearly two-thirds indicating they feel Canada is currently in a recession or will enter one before the end of the year.

Around 86% said inflation is in their top three household financial concerns over the next six months — the highest percentage since TransUnion began tracking it quarterly in 2022.

Last month, Statistics Canada said the annual inflation rate unexpectedly ticked higher in May to 2.9%, compared with 2.7% in April.

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

Fabian said that while inflation has fallen over the past year, the rising cost of necessities such as groceries, gasoline and utilities is still “nagging” on many consumers.

Grocery inflation has slowed considerably in recent months, but food prices are 22.5% higher than they were four years ago, Statistics Canada reported last month.

“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,” Fabian said.

“So are they going to pay for these things or are they going to pay down debt? It creates a little bit more stress.”

Around 27% 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.